Exhibit 1
EXECUTION COPY
AMENDED AND RESTATED STOCK AND NOTE PURCHASE AGREEMENT
by and among
LAZARD FRERES REAL ESTATE INVESTORS L.L.C.
and
PROMETHEUS ASSISTED LIVING LLC
and
ARV ASSISTED LIVING, INC.
TABLE OF CONTENTS
Page
ARTICLE I
Definitions...............................................1
ARTICLE 2
Purchase and Sale of Shares; Closing
Section 2.1 Purchase and Sale.........................................8
Section 2.2 Consideration.............................................8
Section 2.3 Initial Closing...........................................8
Section 2.4 Subsequent Purchases and Sales............................8
Section 2.5 Additional Agreements and Closing Deliveries..............9
ARTICLE 3
Representations and Warranties of the Company
Section 3.1 Organization and Qualification; Subsidiaries..............9
Section 3.2 Authority Relative to Agreements; Board Approval.........10
Section 3.3 Capital Stock............................................10
Section 3.4 No Conflicts; No Defaults; Required Filings and Consents.11
Section 3.5 SEC and Other Documents; Financial Statements;
Undisclosed Liabilities................................11
Section 3.6 Litigation; Compliance With Law..........................12
Section 3.7 Absence of Certain Changes or Events.....................13
Section 3.8 Tax Matters and Partnership Status.......................13
Section 3.9 Compliance with Agreements; Material Agreements..........14
Section 3.10 Company Charter and Company By-laws; Corporate Records...16
Section 3.11 Properties...............................................17
Section 3.12 Environmental Matters....................................19
Section 3.13 Employees and Employee Benefit Plans.....................21
Section 3.14 Labor Matters............................................23
Section 3.15 Affiliate Transactions...................................23
Section 3.16 Insurance................................................24
Section 3.17 Proxy Statement..........................................24
Section 3.18 Regulatory Compliance....................................24
Section 3.19 Vote Required............................................26
Section 3.20 Brokers or Finders.......................................27
Section 3.21 Knowledge Defined........................................27
Section 3.22 Certain Information......................................27
Page
ARTICLE 4
Representations and Warranties of Buyer and the Advancing Party
Section 4.1 Organization.............................................28
Section 4.2 Due Authorization........................................28
Section 4.3 Conflicting Agreements and Other Matters.................28
Section 4.4 Acquisition for Investment; Sophistication;
Source of Funds........................................28
Section 4.5 Proxy Statement..........................................29
Section 4.6 Brokers or Finders.......................................29
Section 4.7 Investment Company Matters...............................29
ARTICLE 5
Covenants Relating to Closings
Section 5.1 Taking of Necessary Action...............................29
Section 5.2 Registration Rights Agreement............................30
Section 5.3 Stockholders Agreement...................................30
Section 5.4 Public Announcements; Confidentiality....................30
Section 5.5 No Solicitation of Transactions..........................31
Section 5.6 Information and Access...................................32
ARTICLE 6
Certain Additional Covenants
Section 6.1 Resale...................................................32
Section 6.2 Guarantee................................................33
ARTICLE 7
Conditions to Closings
Section 7.1 Conditions of Purchase at Initial Closing................33
Section 7.2 Conditions of Sale.......................................34
ARTICLE 8
Survival; Indemnification
Section 8.1 Survival.................................................34
Section 8.2 Indemnification by Buyer or the Company..................35
Section 8.3 Third-Party Claims.......................................35
ARTICLE 9
Termination
Section 9.1 Termination..............................................36
Section 9.2 Procedure and Effect of Termination......................36
Section 9.3 Expenses.................................................37
ARTICLE 10
Miscellaneous
Section 10.1 Counterparts.............................................37
Section 10.2 Governing Law............................................37
Section 10.3 Entire Agreement.........................................37
Section 10.4 Notices..................................................37
Section 10.5 Successors and Assigns...................................38
Section 10.6 Headings.................................................38
Section 10.7 Amendments and Waivers...................................38
Section 10.8 Interpretation; Absence of Presumption...................38
Section 10.9 Severability.............................................39
Section 10.10 Further Assurances.......................................39
Section 10.11 Specific Performance.....................................39
Section 10.12 Joint and Several Liability..............................39
Section 10.13 Interpretation of Schedules..............................39
Section 10.14 Acknowledgment of Company's Right to Take
Certain Actions........................................39
SCHEDULES
Schedule 1.5 Affiliated Limited Partnerships
Schedule 1.75 Permitted Liens
Schedule 3.1(d) Subsidiaries
Schedule 3.3(a) Capital Stock Commitments
Schedule 3.3(b) Other Equity Interests
Schedule 3.4(d)-A Consents for Initial Closing
Schedule 3.4(d)-B Consents for Second Closing
Schedule 3.5(a) Company Registration Statements and Company Reports
Schedule 3.6(a) Pending Litigation
Schedule 3.8(a) Tax Matters
Schedule 3.8(b) Tax Assets
Schedule 3.8(f) Tax Agreements
Schedule 3.9(c) Contracts
Schedule 3.10(a) Organizational Documents
Schedule 3.11(a) Real Property
Schedule 3.11(b) Letters of Intent or Similar Understandings
Schedule 3.11(c) Rights of First Refusal
Schedule 3.11(d) Non-Compliance and Capital Expenditure Budget and
Schedule
Schedule 3.11(e) Development Properties
Schedule 3.11(g) Structural and Engineering Matters
Schedule 3.12(e) Environmental Concerns
Schedule 3.12(e) Environmental Concerns
Schedule 3.12(d) Environmental Matters
Schedule 3.12(f) Environmental Reports
Schedule 3.13(a) Employment Agreements
Schedule 3.13(b) Company Plans
Schedule 3.13(c) Company Plan Liabilities
Schedule 3.13(d) New Employee Benefit Plans
Schedule 3.13(g) Termination and Retirement Benefits
Schedule 3.13(k) Employee Benefits Triggered or Accelerated
Schedule 3.14 Collective Bargaining; Labor Union Agreements
Schedule 3.15 Affiliate Transactions
Schedule 3.16 Insurance Policies
Schedule 3.18(a) Regulatory Compliance
Schedule 3.18(b) Billing Practices
Schedule 3.18(e) Third Party Payors
Schedule 3.22 Certain Matters
EXHIBITS
Exhibit A Registration Rights Agreement
Exhibit B Stockholders Agreement
Exhibit C Indenture
THIS AMENDED AND RESTATED STOCK AND NOTE PURCHASE
AGREEMENT (this "Agreement"), dated as of October 29,
1997, is made by and between ARV Assisted Living, Inc.,
a California corporation (the "Company"), Lazard Freres
Real Estate Investors L.L.C., a New York limited
liability company or an Affiliate thereof (the
"Advancing Party") and Prometheus Assisted Living LLC,
a Delaware limited liability company and an affiliate
of the Advancing Party ("Buyer").
RECITALS:
WHEREAS, Buyer, the Advancing Party and the Company have entered
into a Stock Purchase Agreement dated as of July 14, 1997 (as amended to
date, the "Stock Purchase Agreement"), pursuant to which Buyer has
purchased from the Company 1,921,012 shares of the Company's common stock
(the "Company Common Stock") at a price equal to the Per Share Purchase
Price;
WHEREAS, Buyer, the Advancing Party, and the Company desire to
amend and restate the Stock Purchase Agreement to provide for the purchase
by Buyer from the Company of $60,000,000 aggregate principal amount of the
Company's 6.75% Convertible Subordinated Notes due 2007 (the "Company
Notes"), to be issued pursuant to the Indenture attached as Exhibit C (the
"Indenture"), and to make certain other changes thereto; and
WHEREAS, the Company and Buyer believe that the combination in a
strategic alliance of the Company's leadership, expertise and experience in
development, management and operation of assisted living communities and
the proven investment and capital markets expertise and access to capital
of Buyer and its affiliates will significantly enhance the Company's
ability to pursue its growth and operating strategies;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, and
for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby,
the parties hereto hereby agree to amend and restate the Stock Purchase
Agreement as follows:
ARTICLE I
Definitions
As used in this Agreement, the following terms shall have the
following meanings:
"Action" shall mean any action, suit, arbitration, inquiry,
proceeding or investigation by or before any Government Authority.
"ADA" shall mean the Americans with Disabilities Act.
"Advancing Party" shall have the meaning set forth in the
first paragraph hereof.
"Affiliate" shall have the meaning ascribed thereto in Rule
12b-2 promulgated under the Exchange Act, and as in effect on the date
hereof.
"Affiliated Limited Partnerships" shall mean those limited
partnerships set forth in Schedule 1.5, which schedule lists those limited
partnerships which the Company is the general partner of but which are not
Subsidiaries.
"Agreement" shall have the meaning set forth in the first
paragraph hereof.
"Benefit Arrangements" shall have the meaning set forth in
Section 3.13(h).
"Beneficially Owned" has the meaning assigned to that term in
the Stockholders Agreement.
"Blue Sky Laws" shall have the meaning set forth in Section
3.4(e).
"Board" shall mean the Board of Directors of the Company.
"Broker" shall have the meaning set forth in Section 3.20.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a bank holiday in New York, N.Y.
"Buyer" shall have the meaning set forth in the first
paragraph hereof.
"Capital Expenditure Budget and Schedule" shall have the
meaning set forth in Section 3.11(d).
"CERCLA" shall have the meaning set forth in Section 3.12(e).
"CHAMPUS" means the United States Department of Defense
Civilian Health and Medical Program of the Uniformed Services.
"Claim" shall have the meaning set forth in Section
3.12(g)(i).
"Closing" shall mean the consummation of the Note Purchase.
"Closing Date" shall mean October 30, 1997.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto, including all of the rules and
regulations promulgated thereunder.
"Commitment" shall have the meaning set forth in Section 3.7.
"Company" shall have the meaning set forth in the first
paragraph hereof.
"Company By-laws" shall mean the by-laws of the Company and
any amendment or supplement thereto, as in effect on the date hereof.
"Company Charter" shall mean the Restated Articles of
Incorporation of the Company and any amendment or supplement thereto, as in
effect on the date hereof.
"Company Common Stock" and "Company Notes" shall have the
meaning set forth in the Recitals hereof.
"Company Environmental Reports" shall have the meaning set
forth in Section 3.12(f).
"Company Plans" shall have the meaning set forth in Section
3.13(b).
"Company Preferred Stock" shall have the meaning set forth in
Section 3.3(a).
"Company Properties" shall have the meaning set forth in
Section 3.1l(a).
"Company Registration Statement" shall have the meaning set
forth in Section 3.5(a).
"Company Reports" shall have the meaning set forth in Section
3.5(a).
"Company Stock" shall mean, collectively, the Company Common
Stock and any other shares of capital stock of the Company.
"Competing Transaction" shall mean (i) any acquisition in any
manner, directly or indirectly (including through any option, right to
acquire or other beneficial ownership), of more than 15% of the equity
securities, on a Fully Diluted Basis, of the Company, or assets
representing a material portion of the assets of the Company, other than
any of the transactions contemplated by this Agreement or (ii) any merger,
consolidation, sale of assets, share exchange, recapitalization, other
business combination, liquidation, or other action out of the ordinary
course of business of the Company, other than any of the transactions
contemplated by this Agreement.
"Contracts" shall have the meaning set forth in Section
3.9(c).
"Controlled Group Liability" shall have the meaning set forth
in Section 3.13(h).
"Convertible Debt" shall mean the Company's 6-3/4%
Convertible Subordinated Notes due 2006.
"Debt Instruments" shall mean all notes, loan agreements,
mortgages, deeds of trust or similar instruments which evidence or secure
any indebtedness owing by the Company or any of its Subsidiaries.
Section 1.1. "Development Budget and Schedule" shall have the
meaning set forth in Section 3.11(e).
Section 1.2. "Employee Benefit Plans" shall have the meaning
set forth in Section 3.13(h).
"Employees" shall have the meaning set forth in Section
3.13(h).
"Environmental Claim" shall have the meaning set forth in
Section 3.12(g)(ii).
"Environmental Laws" shall have the meaning set forth in
Section 3.12(g)(iii).
"Environmental Permits" shall have the meaning set forth in
Section 3.12(a).
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended, including all of the rule and regulations
promulgated thereunder and any successor thereto.
"ERISA Affiliates" shall mean any entity which is under
"common control" with the Company, within the meaning of Section 4001(b)(1)
of ERISA.
"Exchange Act" shall have the meaning set forth in Section
3.4(e).
"Fully Diluted Basis" shall mean then outstanding Company
Stock plus any shares of stock or other equity or debt exchangeable for
Company Stock and any shares of stock or other equity or debt the holders
of which, after such exchanges would have the right to vote with the
stockholders of the Company on any matter, and shall include Company Common
Stock issuable pursuant to the Company Notes, the Convertible Debt, the
instruments listed in Schedule 3.3(a) and under option or other
equity-incentive plans listed on Schedule 3.13(b) and awards issued
pursuant thereto.
"GAAP" shall have the meaning set forth in Section 3.5(b).
"Government Authority" shall mean any government or state (or
any subdivision thereof) of or in the United States, or any agency,
authority, bureau, commission, department or similar body or
instrumentality thereof, or any governmental court or tribunal.
"Governmental Entity" means any governmental or any agency,
bureau, board, commission, court, department, official, political
subdivision, tribunal or other instrumentality of any government or any
quasi-governmental authority or self-regulatory organization, whether
federal, state or local, domestic or foreign.
"Indemnified Party" shall mean Buyer or the Company, as the
context may require.
"Indenture" shall have the meaning set forth in the Recitals
hereof.
"Insurance Policies" shall have the meaning set forth in
Section 3.16.
"IRS" shall mean the Internal Revenue Service.
"Laws" means any federal or state constitutional provision,
statute, other rule, law, regulation or interpretation of any Governmental
Entity and any Order, each as interpreted by the appropriate Governmental
Entities prior to the Closing Date.
"Leased Property" shall have the meaning set forth in Section
3.11(a).
"Liabilities" shall mean, as to any person, all debts,
adverse claims, liabilities and obligations, direct, indirect, absolute or
contingent of such person, whether known or unknown, accrued, vested or
otherwise, whether in contract, tort, strict liability or otherwise and
whether or not actually reflected, or required by GAAP to be reflected, in
such person's or entity's balance sheets or other books and records,
including without limitation (i) obligations arising from non-compliance
with any law, rule or regulation of any Government Authority or imposed by
any court or any arbitrator of any kind, (ii) all indebtedness or liability
of such person for borrowed money, or for the purchase price of property or
services (including trade obligations), (iii) all obligations of such
person as lessee under leases, capital or other, (iv) liabilities of such
person in respect of plans covered by Title IV of ERISA, or otherwise
arising in respect of plans for Employees or former Employees or their
respective families or beneficiaries, (v) reimbursement obligations of such
person in respect of letters of credit, (vi) all obligations of such person
arising under acceptance facilities, (vii) all liabilities of other persons
or entities, directly, or indirectly, guaranteed, endorsed (other than for
collection or deposit in the ordinary course of business) or discounted
with recourse by such person or with respect to which the person in
question is otherwise directly or indirectly liable, (viii) all obligations
secured by any lien on property of such person, whether or not the
obligations have been assumed, and (ix) all other items which have been, or
in accordance with GAAP would be, included in determining total liabilities
on the liability side of the balance sheet.
"Liens" shall mean all liens, mortgages, deeds of trust,
deeds to secure debt, security interests, pledges, claims, charges,
easements and other encumbrances of any nature whatsoever.
"Loss and Expenses" shall have the meaning set forth in
Section 8.2(a).
"Material Adverse Effect" shall mean, with respect to the
Company and each of its Subsidiaries, a material adverse effect on the
financial condition, results of operations or business of the Company and
such Subsidiaries (to the extent of the Company's interests therein) taken
as a whole.
"Materials of Environmental Concern" shall have the meaning
set forth in Section 3.12(g)(iv).
"Medical Reimbursement Programs" means the Medicare, Medicaid
and CHAMPUS programs and any other health care program operated by or
financed in whole or in part by any foreign or domestic federal, state or
local government.
"Medicaid" means that means-tested entitlement program under
Title XIX of the Social Security Act that provides federal grants to states
for medical assistance based on specific eligibility criteria. (Social
Security Act of 1965, Title XIX, P.L. 89-97, as amended; 42 U.S.C. 1396 et
seq.).
"Medicare" means that government-sponsored entitlement
program under Title XVIII of the Social Security Act that provides for a
health insurance system for eligible elderly and disabled individuals.
(Social Security Act of 1965, Title XVIII, P.L. 89-87, as amended, 42
U.S.C. 1395 et seq.).
"Note Purchase" shall have the meaning set forth in Section
2.1.
"OIG" means the Office of the Inspector General of the United
States Department of Health and Human Services.
"Order" means any decree, injunction, judgment, order,
ruling, assessment or writ.
"Other Filings" shall have the meaning set forth in Section
5.1(b).
"Owned Property" shall have the meaning set forth in Section
3.11(a).
"Pension Plans" shall have the meaning set forth in Section
3.13(h).
"Per Share Purchase Price" shall mean the price of $14.00 per
share for the Company Common Stock, adjusted for any stock split or
reclassification of Company Common Stock.
"Permit" means any license, permit, franchise, certificate of
authority, or order, or any waiver of the foregoing, required to be issued
by any Governmental Entity.
"Permitted Liens" shall mean (i) Liens (other than Liens
imposed under ERISA or any Environmental Law, or in connection with any
Environmental Claim) for taxes or other assessments or charges of
Governmental Authorities that are not yet delinquent or that are being
contested in good faith by appropriate proceedings, in each case, with
respect to which adequate reserves are being maintained by the Company or
its Subsidiaries to the extent required by GAAP, (ii) statutory Liens of
landlords, carriers, warehousemen, mechanics, materialmen and other Liens
(other than Liens imposed under ERISA or any Environmental Law or in
connection with any Environmental Claim) imposed by law and created in the
ordinary course of business for amounts not yet overdue or which are being
contested in good faith by appropriate proceedings, in each case, with
respect to which adequate reserves or other appropriate provisions are
being maintained by the Company or its Subsidiaries to the extent required
by GAAP and which, to the extent same do not relate to work or materials
provided for in the Capital Expenditure Budget and Schedule, the 1998 and
1999 Preliminary Capital Expenditure Budgets and Schedules or the
Development Budget and Schedule, do not exceed $100,000 in the aggregate
(excluding from such calculation, any amounts disclosed in writing by the
Company to Buyer which (a) are fully covered by insurance held by the
Company under which the Company reasonably expects full recovery of such
amounts, or (b) for which an adequate escrow has been established and is,
at the relevant time, maintained), (iii) any leases entered into after
March 31, 1997 in the ordinary course of business on commercially
reasonable terms and that are described in Schedule 1.75, (iv) easements,
rights-of-way, covenants and restrictions which are customary and typical
for properties similar to the Company Properties and which do not (x)
interfere materially with the ordinary conduct of any Company Property or
the business of the Company and its Subsidiaries as a whole or (y) detract
materially from the value or usefulness of the Company Properties to which
they apply and (v) the other Liens, if any, described in Schedule 1.75.
"person" shall mean any individual, corporation, partnership,
limited liability company, joint venture, trust, unincorporated
organization, other form of business or legal entity or Government
Authority.
"Projects" shall have the meaning set forth in Section
3.11(e).
"Proxy Statement" shall have the meaning set forth in Section
5.1(b).
"Purchase Price" shall mean the aggregate principal amount of
the Company Notes issued to Buyer at the Closing plus accrued interest
thereon from October 29, 1997, through (but excluding) the Settlement Date.
"Registration Rights Agreement" shall have the meaning set
forth in Section 2.5(a).
"Regulatory Filings" shall have the meaning set forth in
Section 3.4(e).
"Release" shall have the meaning set forth in Section
3.12(g)(v).
"SEC" shall have the meaning set forth in Section 3.5(a).
"Securities Act" shall have the meaning set forth in Section
3.4(e).
"Securities Laws" shall have the meaning set forth in Section
3.5(a).
"Settlement Date" shall have the meaning set forth in Section
2.2.
"Stockholders Agreement" shall have the meaning set forth in
Section 2.3(a).
"Structural Defect" means a condition of the structure of any
Company Property resulting from faulty engineering, construction, labor or
materials, or from fire or other casualty and in any event includes any
condition that could pose a hazard to life or safety.
"Subsidiaries" shall mean with respect to any person, any
corporation, partnership, limited liability company, joint venture,
business trust or other entity of which such person, directly or
indirectly, (i) owns or controls 50% or more of the securities or other
interests entitled to vote in the election of directors or others
performing similar functions with respect to such corporation or other
organization or (ii) otherwise controls such corporation, partnership,
limited liability company, joint venture, business trust or other entity.
Without limiting the generality of the foregoing, the Company's
Subsidiaries include each of the entities set forth on Schedule 3.1(d) as
Subsidiaries, but shall not include Affiliated Limited Partnerships.
"Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not. The term "Tax" also includes any amounts payable pursuant
to any tax sharing agreement to which any relevant entity is liable as a
successor or pursuant to contract.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof, or any
return or declaration of an informational nature required to be filed with
the IRS or any other Government Authority.
"Termination Event" shall mean the date on which either (i)
the Buyer no longer Beneficially Owns a number of shares of Company Common
Stock equal to at least 5% of the outstanding Company Common Stock, on a
Fully Diluted Basis, or (ii) the Buyer no longer Beneficially Owns Company
Common Stock having an aggregate market value of at least $25,000,000.
"Tax Asset" means any net operating loss, net capital loss,
investment tax credit, foreign tax credit, charitable deduction or any
other credit or tax attribute of the Company and any of its Subsidiaries or
Affiliated Limited Partnerships that could reduce Taxes (including, but not
limited to, deductions or credits relating to alternative minimum Taxes).
"Title Policies" shall have the meaning set forth in Section
3.11(a).
"Transaction Documents" shall mean the Stockholders
Agreement, the Registration Rights Agreement, the Company Notes and the
Indenture.
"Voting Agreements" shall have the meaning set forth in
Section 2.3(a).
"Welfare Plans" shall have the meaning set forth in Section
3.13(h).
ARTICLE 2
Purchase and Sale of Company Notes; Closing
Section 2.1 Purchase and Sale. Subject to the terms and conditions
hereof, at the Closing, the Company will sell, convey, assign, transfer,
and deliver, and Buyer will purchase and acquire from the Company, an
aggregate of $60,000,000 principal amount of the Company Notes (the "Note
Purchase").
Section 2.2 Consideration. Subject to the terms and conditions
hereof, on or before December 1, 1997 (the "Settlement Date"), Buyer shall
deliver to the Company the Purchase Price by wire transfer of immediately
available funds in U.S. dollars to the account or accounts specified by the
Company.
Section 2.3 Additional Agreements and Closing Deliveries.
(a) Concurrently with the execution of this Agreement, (i)
the Company, Buyer and the Advancing Party shall enter into an amended and
restated registration rights agreement substantially in the form attached
as Exhibit A (the "Registration Rights Agreement"), (ii) the Company, Buyer
and the Advancing Party shall enter into an amended and restated
stockholders agreement substantially in the form attached as Exhibit B (the
"Stockholders Agreement") and (iii) Buyer shall have entered into amended
and restated voting agreements with Xxxx X. Booty, Xxxxx X. Xxxxxxx and
Xxxxxx X. Xxxxxx-Xxxxx among other persons (the "Voting Agreements").
(b) In addition to the other things required to be done
hereby, at the Closing the Company shall deliver or cause to be delivered
to Buyer the following: (i) the Company Notes pursuant to the Indenture,
(ii) all certificates and other instruments and documents required by this
Agreement to be delivered by the Company to Buyer at or prior to the
Closing and (iii) such other instruments reasonably requested by Buyer as
may be necessary or appropriate to confirm or carry out the provisions of
this Agreement.
(c) In addition to the other things required to be done
hereby, at the Closing, Buyer shall deliver, or cause to be delivered, to
the Company the following: (i) if not previously delivered to the Company,
all other certificates, documents, instruments and writings required
pursuant hereto to be delivered by or on behalf of Buyer at or before the
Closing and (ii) such other instruments reasonably requested by the Company
as may be necessary or appropriate to confirm or carry out the provisions
of this Agreement.
Section 2.4 Time and Place of Closing. The Closing shall take
place on the Closing Date at such place and time as the Company and Buyer
shall mutually agree.
Section 2.5 Right to Assign. Buyer and the Advancing Party may
assign their rights and delegate their obligations created hereby to
purchase Company Notes in accordance with the provisions of Section 10.5.
ARTICLE 3
Representations and Warranties of the Company
The Company hereby represents and warrants to Buyer as follows in
Section 3.1 through 3.20:
Section 3.1 Organization and Qualification; Subsidiaries.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of California.
The Company has all requisite corporate power and authority to own,
operate, lease and encumber its properties and carry on its business as now
conducted, and to enter into this Agreement and the Transaction Documents
and to perform its obligations hereunder and thereunder.
(b) Each of the Subsidiaries of the Company is a
corporation, partnership or limited liability company duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation or organization, and has the corporate, partnership or
limited liability company power and authority to own its properties and to
carry on its business as it is now being conducted.
(c) Each of the Company and its Subsidiaries is duly
qualified to do business and in good standing in each jurisdiction in which
the ownership of its property or the conduct of its business requires such
qualification, except for any failures to be so qualified or to be in good
standing as would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
(d) Schedule 3.1(d) sets forth the name of each Subsidiary
of the Company (whether owned, directly or indirectly, through one or more
intermediaries) and each Affiliated Limited Partnership. All of the
outstanding shares of capital stock of, or other equity interest in, each
of the Subsidiaries owned by the Company are duly authorized, validly
issued, fully paid and nonassessable, and are owned, directly or
indirectly, by the Company free and clear of all Liens, except as set forth
in Schedule 3.1(d). The following information for each Subsidiary and
Affiliated Limited Partnership is set forth in Schedule 3.1(d), if
applicable: (i) its name and jurisdiction of incorporation or organization,
(ii) the type of and percentage interest held by the Company in the
Subsidiary or Affiliated Limited Partnership and the names of and
percentage interest held by the other interest holders, if any, in the
Subsidiaries, and (iii) any loans from the Company to, or priority payments
due to the Company from, the Subsidiary or Affiliated Limited Partnerships,
and the rate of return thereon. Except as contemplated hereby and as set
forth on Schedule 3.1(d), there are no existing options, warrants, calls,
subscriptions, convertible securities or other rights, agreements or
commitments which obligate the Company or any of the Subsidiaries or
Affiliated Limited Partnerships to issue, transfer or sell any shares of
capital stock or equity interests in any of the Subsidiaries or Affiliated
Limited Partnerships except as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
Section 3.2 Authority Relative to Agreements; Board Approval.
(a) The execution, delivery and performance of this
Agreement and the Transaction Documents have been duly and validly
authorized by all necessary action on the part of the Company. This
Agreement and the Transaction Documents have been duly executed and
delivered by the Company for itself and constitute the valid and legally
binding obligation of the Company, enforceable against the Company in
accordance with their terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights or general
principles of equity.
(b) The Board has, as of the date hereof, approved this
Agreement and the Transaction Documents and the transactions contemplated
hereby and thereby.
(c) It is not necessary in connection with the offer, sale
and delivery of the Company Notes in the manner contemplated by this
Agreement to register the Company Notes under the Securities Act or to
qualify the Indenture under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"), except as contemplated by the Company Note
Registration Agreement.
(d) The Company Notes are in the forms contemplated by the
Indenture and have been duly authorized by the Company, and when executed
and authenticated in accordance with the terms of the Indenture and
delivered against payment therefor in accordance with the terms hereof,
will be the legally valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms and entitled
to the benefits of the Indenture.
(e) The Indenture has been duly authorized by the Company
and at the Closing Date will have been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery thereof
by the Trustee, will be the legally valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms. The
Indenture is in a form that would qualify under the Trust Indenture Act.
(f) The shares of Company Common Stock initially issuable
upon conversion of the Company Notes have been duly and validly authorized
and reserved for issuance, and such shares, when issued upon such
conversion, will be validly issued, fully paid and nonassessable and the
issuance of such shares upon such conversion will not be subject to
preemptive or other rights to subscribe for any shares of Company Common
Stock or any other equity securities of the Company.
Section 3.3 Capital Stock.
(a) The authorized capital stock of the Company as of the
date hereof consists of 100,000,000 shares of Company Common Stock, no par
value per share, and 10,000 shares of Series A Convertible Redeemable
Preferred Stock, no par value per share ("Company Preferred Stock"). As of
the date hereof, there were 11,584,272 shares of Company Common Stock
issued and outstanding and no shares of Company Preferred Stock issued and
outstanding. All issued and outstanding shares of Company Common Stock are
duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. Except for the Company Notes and as set forth on
Schedule 3.3(a), the Company has no outstanding bonds, debentures, notes or
other obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities the holders of which have
the right to vote) with the stockholders of the Company on any matter. As
of the date hereof, except for the Company Notes and as set forth in
Schedule 3.3(a) to this
Agreement, there are no existing options, warrants, calls, subscriptions,
convertible securities, or other rights, agreements or commitments which
obligate the Company to issue, transfer or sell any shares of capital stock
or other equity interests of the Company.
(b) Except for interests in the Subsidiaries and the
Affiliated Limited Partnerships of the Company and except as set forth in
Schedule 3.3(b), none of the Company or any of its Subsidiaries own
directly or indirectly any interest or investment (whether equity or debt)
in any corporation, partnership, limited liability company, joint venture,
business, trust or entity (other than investments in short-term investment
securities).
Section 3.4 No Conflicts; No Defaults; Required Filings and
Consents. Neither the execution and delivery by the Company hereof nor the
consummation by the Company of the transactions contemplated hereby in
accordance with the terms hereof, will:
(a) conflict with or result in a breach of any provisions of
the Company Charter or Company By-laws;
(b) result in a breach or violation of, a default under, or
the triggering of any payment or other obligations pursuant to any
Contract;
(c) violate or conflict with any statute, regulation,
judgment, order, writ, decree or injunction applicable to the Company or
its Subsidiaries, except as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect;
(d) subject to the Company obtaining the third party
consents set forth in Schedule 3.4(d), violate or conflict with or result
in a breach of any provision of, or constitute a default (or any event
which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination or in a right of termination or
cancelation of, or accelerate the performance required by, or result in the
creation of any Lien upon any of the properties of the Company or its
Subsidiaries under, or result in being declared void, voidable or without
further binding effect, or change the conversion rate of any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, convertible debenture, or any license, franchise, permit, lease,
contract, agreement or other instrument, commitment or obligation to which
the Company or its Subsidiaries is a party, or by which the Company or its
Subsidiaries or any of their properties is bound or affected, except for
any of the foregoing matters which would not reasonably be expected to,
individually or in the aggregate, result in a Material Adverse Effect; or
(e) require any consent, approval or authorization of, or
declaration, filing or registration with, any Government Authority, other
than any filings required under the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or state securities laws ("Blue Sky Laws") (collectively,
the "Regulatory Filings"), and any filings required to be made with the
Secretary of State of California or any national securities exchange on
which the Company Common Stock is listed, except as would not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Effect.
Section 3.5 SEC and Other Documents; Financial Statements;
Undisclosed Liabilities.
(a) The Company has delivered or made available to Buyer the
registration statement of the Company filed with the Securities and
Exchange Commission
("SEC") in connection with the Company's initial public offering of Company
Common Stock, and all exhibits, amendments and supplements thereto
(collectively, the "Company Registration Statement"), and each registration
statement, report, proxy statement or information statement and all
exhibits thereto prepared by it or relating to its properties since the
effective date of the Company Registration Statement, which are set forth
in Schedule 3.5(a), each in the form (including exhibits and any amendments
thereto) filed with the SEC (collectively, the "Company Reports"). Except
as set forth in Schedule 3.5(a), the Company Reports were filed with the
SEC in a timely manner and constitute all forms, reports and documents
required to be filed by the Company under the Securities Act, the Exchange
Act and the rules and regulations promulgated thereunder (the "Securities
Laws"). As of their respective dates, the Company Reports (i) complied as
to form in all material respects with the applicable requirements of the
Securities Laws and (ii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. There is no
unresolved violation asserted or comments issued by any Government
Authority with respect to any of the Company Reports.
(b) Each of the balance sheets included in or incorporated
by reference into the Company Reports (including the related notes and
schedules) fairly presented the financial position of the entity or
entities to which it relates as of its date and each of the statements of
operations, stockholders' equity (deficit) and cash flows included in or
incorporated by reference into the Company Reports (including any related
notes and schedules) fairly presented the results of operations, retained
earnings or cash flows, as the case may be, of the entity or entities to
which it relates for the periods set forth therein, in each case in
accordance with United States generally accepted accounting principles
("GAAP") consistently applied during the periods involved, except as may be
noted therein and except, in the case of the unaudited statements, normal
recurring year-end adjustments which would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
(c) Except as and to the extent set forth in the Company
Reports and the Company's financial statements filed with the SEC or in any
Schedule hereto, to the Company's knowledge, none of the Company or any of
its Subsidiaries has any Liabilities (nor do there exist any circumstances)
that would, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.
(d) The books of account and other financial records of the
Company and each of its Subsidiaries are in all respects true and complete,
have been maintained in accordance with good business practices, and are
accurately reflected in all respects in the financial statements included
in the Company Reports, except, in each case, as would not, individually or
in the aggregate, reasonably be expected to result in a Material Adverse
Effect.
Section 3.6 Litigation; Compliance With Law.
(a) Except as set forth on Schedule 3.6(a), there are no
Actions pending or, to the Company's knowledge, threatened against the
Company or any of its Subsidiaries that would, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect,
or which question the validity of this Agreement or any Transaction
Document or any action taken or to be taken in connection herewith or
therewith. Except as set forth on Schedule 3.6(a), the maximum liability of
the Company with respect to each Action set forth on Schedule 3.6(a) is
fully covered by policies of insurance described in Section 3.16. Except as
disclosed in Schedule 3.6(a), there are no continuing orders,
injunctions or decrees of any Government Authority to which the Company or
any of its Subsidiaries is a party or by which any of its properties or
assets are bound.
(b) None of the Company or its Subsidiaries is in violation
of any statute, rule, regulation, order, writ, decree or injunction of any
Government Authority or any body having jurisdiction over them or any of
their respective properties which, if enforced, would, individually or in
the aggregate, reasonably be expected to result in a Material Adverse
Effect.
Section 3.7 Absence of Certain Changes or Events. Except as
disclosed in the Company Reports filed with the SEC prior to the date
hereof and except as disclosed in Schedule 3.7 since March 31, 1997, the
Company and each of its Subsidiaries has conducted its business only in the
ordinary course and has operated, constructed, developed, acquired and
entered into management contracts and leases in respect of assisted living
facilities only in the ordinary course of such business, and there has not
been (a) any change, circumstance or event that would reasonably be
expected to result in a Material Adverse Effect, (b) any declaration,
setting aside or payment of any dividend or other distribution with respect
to the Company Common Stock, except in accordance with Section 5.5, (c) any
commitment, contractual obligation, borrowing, capital expenditure or
transaction (each, a "Commitment") entered into by the Company or any of
its Subsidiaries, other than Commitments which would not, individually or
in the aggregate, reasonably be expected to result in a Material Adverse
Effect or (d) any change in the Company's accounting principles, practices
or methods which would, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
Section 3.8 Tax Matters and Partnership Status.
(a) The Company, each of its Subsidiaries and each of its
Affiliated Limited Partnerships has timely filed with the appropriate
taxing authority all Tax Returns required to be filed by it or has timely
requested extensions and any such request has been granted and has not
expired. Each such Tax Return, as amended (if applicable), is, or will be,
as the case may be, complete and accurate in all respects. All Taxes
(including Taxes for which no Tax Returns are required to be filed and
including payroll and wage withholding Taxes) of the Company and any of its
Subsidiaries and Affiliated Limited Partnerships, or for which the Company
or any of its Subsidiaries or Affiliated Limited Partnerships is or could
otherwise be held liable, have been duly and timely paid or accrued, except
for Taxes being contested in good faith and for which adequate reserves
have been taken. The Company, each of its Subsidiaries and each of its
Affiliated Limited Partnerships has properly accrued all Taxes for such
periods subsequent to the periods covered by such Tax Returns as required
by GAAP. None of the Company or any of its Subsidiaries or Affiliated
Limited Partnerships has executed or filed with the IRS or any other taxing
authority any agreement now in effect extending the period for assessment
or collection of any Tax. Except as set forth in Schedule 3.8(a), none of
the Company or any of its Subsidiaries or Affiliated Limited Partnerships
or any of its Employee Benefit Plans or Benefit Arrangements is being
audited or examined by any taxing authority with respect to any Tax or is a
party to any pending action or proceedings by any taxing authority or other
Government Authority for assessment or collection of any Tax, and no claim
for assessment or collection of any Tax has been asserted against it. True
and complete copies of all federal, state and local income or franchise Tax
Returns filed by the Company, each of its Subsidiaries and each of its
Affiliated Limited Partnerships for 1994 and 1995 and all communications
relating thereto have been delivered to Buyer or made available to
representatives of Buyer prior to the date hereof. No claim has been made
in writing or, to the Company's knowledge, otherwise by an authority in a
jurisdiction where the Company or any of its Subsidiaries or Affiliated
Limited Partnerships does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction.
Except as set forth in Schedule 3.8(a) and except for any Tax appeal filed
by the Company or its Subsidiaries in the ordinary course of business,
there is no dispute or claim concerning any Tax liability of the Company or
any of its Subsidiaries or Affiliated Limited Partnerships, (i) claimed or
raised by any taxing authority, either orally or in writing or (ii) as to
which the Company or any of its Subsidiaries or Affiliated Limited
Partnerships has knowledge.
(b) Except as set forth in Schedule 3.8(b), all Tax Assets,
deductions and credits (including, but not limited to, the low-income
housing credit under Section 42 of the Internal Revenue Code of 1986, as
amended) claimed or, in the case a Tax Return for which an extension has
been granted, to be claimed, on a Tax Return of the Company or any of its
Subsidiaries or Affiliated Limited Partnerships have been or will be, as
the case may be, timely and properly claimed.
(c) Any amount or other entitlement that could be received
(whether in cash or property or the vesting of property) as a result of any
of the transactions contemplated hereby by any Employee, officer, or
director of the Company or any of its Affiliates or independent contractor
who is a "disqualified individual" (as such term is defined in proposed
Treasury Regulation Section 1.28OG-1) under any employment, severance or
termination agreement, other compensation arrangement or plan currently in
effect would not be characterized as an "excess parachute payment" (as such
term is defined in Section 28OG(b)(1) of the Code).
(d) The disallowance of a deduction under Section 162(m) of
the Code for employee remuneration will not apply to any amount paid or
payable by the Company or any of its Subsidiaries under any contract, stock
plan, program, arrangement or understanding currently in effect.
(e) The Affiliated Limited Partnerships are and will
continue to be classified as partnerships for United States federal income
and all other relevant tax law purposes.
(f) Except as set forth in Schedule 3.8(f), none of the
Company or any of its Subsidiaries or Affiliated Limited Partnerships is a
party to or is bound by any agreement, arrangement or practice with respect
to Taxes. The Company has delivered to Buyer complete and accurate copies
of any such written agreement, arrangement or practice, and complete and
accurate descriptions of any such oral agreement, arrangement or practice.
Section 3.9 Compliance with Agreements; Material Agreements.
(a) Neither the Company nor any of its Subsidiaries is in
default under or in violation of any provision of the Company Charter or
the Company By-laws or any Contract, except for such defaults or violations
which would not, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Effect.
(b) The Company and each of its Subsidiaries have filed all
material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were
required to file with any Government Authority and all other material
reports and statements required to be filed by them, including any report
or statement required to be filed pursuant to the laws, rules or
regulations of the United States, and have paid all fees or assessments due
and payable in connection therewith, except for such failures to file or
pay which would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect. There is no unresolved
violation asserted
by any regulatory agency of which the Company has received written notice
with respect to any report or statement relating to an examination of the
Company or any of its Subsidiaries which, if resolved in a manner
unfavorable to the Company or such Subsidiary, would, individually or in
the aggregate, reasonably be expected to result in a Material Adverse
Effect.
(c) Except as set forth in Schedule 3.9(c), neither the
Company nor any Subsidiary is a party to or bound by any:
(i) employment agreement or employment contract that has an
aggregate future liability in excess of $50,000 and is not
terminable by the Company or a Subsidiary by notice of not more
than 60 days for a cost of less than $50,000;
(ii) employee collective bargaining agreement or other
contract with any labor union;
(iii) covenant of the Company or a Subsidiary not to
compete;
(iv) agreement, contract or other arrangement with any
current or former officer, director, employee, or Affiliate or
relative thereof, of the Company or any Subsidiary (other than
employment agreements covered by clause (i) above);
(v) lease, sublease or similar agreement involving annual
payments in excess of $50,000 with any person (other than the
Company or a Subsidiary) under which the Company or a Subsidiary
is a lessor or sublessor of, or makes available for use to any
person (other than the Company or a Subsidiary), (A) any Company
Property or (B) any portion of any premises otherwise occupied by
the Company or a Subsidiary;
(vi) lease or similar agreement with any person (other than
the Company or a Subsidiary) under which (A) the Company or a
Subsidiary is lessee of, or holds or uses, any machinery,
equipment, vehicle or other tangible personal property owned by
any person or (B) the Company or a Subsidiary is a lessor or
sublessor of, or makes available for use by any person, any
tangible personal property owned or leased by the Company or a
Subsidiary, in any such case which has an aggregate annual future
liability or receivable, as the case may be, in excess of $50,000
and is not terminable by the Company or a Subsidiary by notice of
not more than 60 days for a cost of less than $50,000;
(vii) (A) continuing contract for the future purchase of
materials, supplies or equipment (other than purchase contracts
and orders for inventory in the ordinary course of business
consistent with past practice) in excess of $50,000 annually, (B)
management, service, consulting or other similar type of contract
or (C) advertising agreement or arrangement, in any such case
which has an aggregate future liability to any person (other than
the Company or a Subsidiary) in excess of $50,000 and is not
terminable by the Company or a Subsidiary by notice of not more
than 60 days for a cost of less than $50,000;
(viii) material license, option or other agreement relating
in whole or in part to intellectual property (including any
license or other agreement under which the Company or a
Subsidiary is license or licensor of any such intellectual
property);
(ix) agreement, contract or other instrument under which the
Company or a Subsidiary has borrowed any money from, or issued
any note, bond, debenture or other evidence of indebtedness to,
any person (other than the Company or a Subsidiary) or any other
note, bond, debenture or other evidence of indebtedness issued to
any person (other than the Company or a Subsidiary);
(x) agreement, contract or other instrument (including
so-called take-or-pay or keepwell agreements) under which (A) any
person (including the Company or a Subsidiary) has directly or
indirectly guaranteed indebtedness, liabilities or obligations of
the Company or a Subsidiary or (B) the Company or a Subsidiary
has directly or indirectly guaranteed indebtedness, liabilities
or obligations of any person (in each case other than
endorsements for the purpose of collection in the ordinary course
of business);
(xi) agreement, contract or other instrument under which the
Company or a Subsidiary has, directly or indirectly, made any
advance, loan, extension of credit or capital contribution in
excess of $50,000 to, or other investment in, any person (other
than the Company or a Subsidiary);
(xii) mortgage, pledge, security agreement, deed of trust or
other instrument granting a lien or other encumbrance upon any
Company Property;
(xiii) agreement or instrument providing for indemnification
of any person with respect to liabilities relating to any current
or former business of the Company, a Subsidiary or any
predecessor person exclusive of indemnifications included in
other documents on Schedule 3.9(c) or granted to sellers of real
property owned or leased by the Company or its Affiliates; or
(xiv) other agreement, contract, management contract, lease,
license, commitment or instrument to which the Company or any
Subsidiary is a party or by or to which it or any of its assets
or business is bound or subject, none of which are, on an
individual basis, material to the Company (as opposed to the
Company and its Subsidiaries taken as a whole).
Except as set forth in Schedule 3.9(c), all agreements, contracts, leases,
licenses, commitments or instruments of the Company or any Subsidiary
listed in the Schedules hereto (collectively, the "Contracts") are valid,
binding and in full force and effect and are enforceable by the Company or
the relevant Subsidiary in accordance with its terms. Except as set forth
in Schedule 3.9(c), the Company and the Subsidiaries have performed all
material obligations required to be performed by them to date under the
Contracts and they are not (with or without the lapse of time or the giving
of notice, or both) in breach or default in any material respect thereunder
and, to the knowledge of the Company, no other party to any of the
Contracts is (with or without the lapse of time or the giving of notice, or
both) in breach or default in any material respect thereunder. Except as
set forth in Schedule 3.9(c), there are no change of control or similar
provisions or any obligations arising under any Contract which are created,
accelerated or triggered by the execution, delivery or performance of this
Agreement or the Transaction Documents or the consummation of the
transactions contemplated hereby or thereby.
Section 3.10 Company Charter and Company By-laws; Corporate
Records.
(a) The Company has delivered to Buyer true and complete
copies of the Company Charter and the Company By-laws, as amended to date,
and the charter, by-
laws, organization documents, partnership agreements of its Subsidiaries,
and all amendments thereto. All such documents are listed in Schedule
3.10(a).
(b) The minute books and other records of corporate
proceedings of the Company and each of its Subsidiaries contain in all
material respects accurate records of all meetings and accurately reflect
in all material respects all other corporate action of the stockholders and
directors and any committees of the Board of Directors of the Company and
their Subsidiaries which are corporations, except for documentation of
discussions relating to or in connection with the transactions contemplated
hereby or matters related hereto, and except as would not, individually or
in the aggregate, reasonably be expected to result in a Material Adverse
Effect. True and complete copies of the foregoing have been delivered to
Buyer prior to the date hereof. The Company does not keep written records
of the partnership proceedings of the Company's Subsidiaries that are
partnerships.
Section 3.11 Properties.
(a) Schedule 3.11(a) sets forth a complete and accurate list
and the address of all real property and interests in real property owned
in fee by the Company and the Subsidiaries (individually, an "Owned
Property"). Schedule 3.11(a) sets forth a complete list of all real
property and interests in real property leased by the Company and the
Subsidiaries (individually, a "Leased Property"). The Company or a
Subsidiary has (i) good and insurable fee title to all Owned Property and
(ii) good and valid title to the leasehold estates in all Leased Property
(an Owned Property or Leased Property being sometimes referred to herein,
individually, as a "Company Property" and, collectively, as "Company
Properties"), in each case free and clear of all mortgages, liens, security
interests, encumbrances, leases, assignments, subleases, easements,
covenants, rights-of-way and other similar restrictions of any nature
whatsoever, except (A) such as are set forth in Schedule 3.11(a) or on
Schedule 3.9(c), (B) Permitted Liens, (C) financing statements, easements,
covenants, rights-of-way and other similar restrictions of record and (D)
(I) zoning, building and other similar restrictions, (II) mortgages, liens,
security interests, encumbrances, easements, covenants, rights-of-way and
other similar restrictions that have been placed by any developer, landlord
or other third party on property over which the Company or any Subsidiary
has easement rights or on any Leased Property and subordination or similar
agreements relating thereto, and (III) unrecorded easements, covenants,
rights-of-way and other similar restrictions, none of which items set forth
in clauses (I), (II) and (III), individually or in the aggregate,
materially impair the continued use and operation of the property to which
they relate in the business of the Company and the Subsidiaries, taken as a
whole, as presently conducted. Except as set forth on Schedule 3.11(a), to
the knowledge of the Company, the current use by the Company and the
Subsidiaries of the offices and other facilities located on Company
Property does not violate any local zoning or similar land use or
government regulations in any material respect. Except as set forth on
Schedule 3.11(a), American Land Title Association policies of title
insurance (or marked title insurance commitments having the same force and
effect as title insurance policies) have been issued by national title
insurance companies insuring the fee simple title of the Company or its
Subsidiaries, as applicable, to each of the Owned Properties in sufficient
amounts to avoid co-insurance statutes, subject only to the matters set
forth therein (the "Title Policies"), and, to the Company's knowledge, the
Title Policies are valid and in full force and effect and no claim has been
made under any such policy. The Company has delivered to Buyer true and
complete copies of all such policies and of the most recent surveys of the
Owned Properties, and true and complete copies of all material exceptions
referenced in such policies and the most recent title reports for and
surveys of each of the Owned Properties.
(b) Schedule 3.11(b) sets forth a complete and accurate list
of all material commitments, letters of intent or similar written
understandings made or entered into by the Company or any of its
Subsidiaries as of the date hereof (x) to sell, mortgage, pledge or
hypothecate any Owned Properties, which, individually or in the aggregate,
are material, or to otherwise enter into a material transaction in respect
of the ownership or financing of any Company Property or (y) to purchase or
to acquire an option, right of first refusal or similar right in respect of
any real property, which, individually or in the aggregate, are material,
which, in any such case, has not yet been reduced to a written lease or
contract, and sets forth with respect to each such commitment, letter of
intent or other understanding the principal terms thereof. The Company has
delivered to Buyer a true and complete copy of each such commitment, letter
of intent or other understanding. Schedule 3.11(b) also sets forth a
complete and accurate list of all agreements to purchase real property to
which the Company or any Subsidiary is a party.
(c) Except as set forth in Schedule 3.11(c), none of the
Company Properties is subject to any outstanding purchase options nor has
the Company or any of its Subsidiaries entered into any outstanding
contracts with others for the sale, mortgage, pledge, hypothecation,
assignment, sublease, lease or other transfer of all or any part of any
Company Property, and no person has any right or option to acquire, or
right of first refusal with respect to, the Company's or any of its
Subsidiaries' interest in any Company Property or any part thereof. None of
the Company or any of its Subsidiaries has any outstanding options or
rights of first refusal or has entered into any outstanding contracts with
others for the purchase of any real property.
(d) Schedule 3.11(d) contains a complete and accurate
description of any noncompliance by any Company Property, to the Company's
knowledge, with any law, ordinance, code, health and safety regulation or
insurance requirement other than such noncompliance as would not,
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect. Schedule 3.11(d) also sets forth the Company's or any
Subsidiary's capital expenditure budget and schedule for each Company
Property, which describes the capital expenditures which the Company or any
Subsidiary has budgeted for such Company Property for the period ending
March 31, 1997 (the "Capital Expenditure Budget and Schedule"). The Capital
Expenditure Budget and Schedule also describes other capital expenditures
as are necessary in order to bring such Company Property into compliance
with applicable laws, ordinances, codes, health and safety regulations and
insurance requirements (including in respect of fire sprinklers, compliance
with the ADA or which the Company otherwise plans or expects to make in
order to cure or remedy any construction, electrical, mechanical or other
defects, to renovate, rehabilitate or modernize such Company Property, or
otherwise, excluding, however, any tenant improvements required to be made
under any Company Lease). Except as set forth in the Capital Expenditure
Budget and Schedule there are no capital expenditure budgets or projections
for periods after March 31, 1998. The costs and time schedules set forth in
the Capital Expenditure Budget and Schedule are reasonable estimates and
projections. Except as set forth in Schedule 3.11(d), there are no
outstanding or, to the Company's knowledge, threatened requirements by any
insurance company which has issued an insurance policy covering any Company
Property, or by any board of fire underwriters or other body exercising
similar functions, requiring any repairs or alterations to be made to any
Company Property that would, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect.
(e) Schedule 3.11(e) contains a list of each Company
Property which consists of or includes undeveloped land or which is in the
process of being developed or redeveloped (collectively, the "Development
Properties") and a brief description of the development or redevelopment
intended by the Company or any Subsidiary to be carried
out or completed thereon (collectively, the "Projects"), including any
budget and development schedule therefor prepared by or for the Company or
any Subsidiary (collectively, the "Development Budget and Schedule").
Except as set forth on Schedule 3.11(e), each Development Property is zoned
for the lawful development or redevelopment thereon of the applicable
Project, and the Company or its Subsidiaries have obtained all permits,
licenses, consents and authorizations required for the lawful development
or redevelopment thereon of such Project, except only for such failure to
meet the foregoing standards as would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect. To the
Company's knowledge, there are no material impediments to or constraints on
the development or redevelopment of any Project in all material respects
within the time frame and for the cost set forth in the Development Budget
and Schedule applicable thereto. In the case of each Project the
development of which has commenced, to the Company's knowledge, the costs
and expenses incurred in connection with such Project and the progress
thereof are consistent and in compliance in all material respects with the
Development Budget and Schedule applicable thereto. The Company has made
available to Buyer all feasibility studies, soil tests, due diligence
reports and other studies, tests or reports performed by or for the Company
at any time since the Company's initial public offering, which relate to
the Development Properties or the Projects.
(f) The Company and each of its Subsidiaries have good and
sufficient title to all the personal and non-real properties and assets
reflected in their books and records as being owned by them (including
those reflected in the balance sheets of the Company and its Subsidiaries
as of March 31, 1997, except as since sold or otherwise disposed of in the
ordinary course of business), free and clear of all Liens, except for
Permitted Liens which are not, individually or in the aggregate, reasonably
expected to have a Material Adverse Effect.
(g) Schedule 3.11(g) sets forth all structural and
engineering reports that are in the Company's possession or control, true
and correct copies of all of which have been heretofore delivered to Buyer.
Except as disclosed in such reports, the Company has received no notice of,
and has no knowledge of any Structural Defect at any Company Property that
would, individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.
Section 3.12 Environmental Matters.
(a) Except as disclosed in the Company Environmental
Reports, each of the Company and its Subsidiaries has obtained, and now
maintains as currently valid and effective, all permits, certificates of
financial responsibility and other governmental authorizations required to
be obtained by the Company or any Subsidiary under the Environmental Laws
(the "Environmental Permits") in connection with the operation of their
respective businesses and properties. Except as disclosed in the Company
Environmental Reports, each of the Company and its Subsidiaries, and each
of the Company Properties is and has been in compliance with all terms and
conditions of the Environmental Permits and all Environmental Laws, except
only to an extent which would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect. The Company
has no knowledge of any circumstances or conditions that may prevent or
interfere with such compliance in the future.
(b) Each of the Company and its Subsidiaries has provided to
Buyer evidence of all formal communications, oral or written (whether from
a Government Authority, citizens' group, employee or other person), which
the Company has received regarding (x) alleged or suspected noncompliance
of any of the Company Properties with any Environmental Laws or
Environmental Permits or (y) alleged or suspected Liability of
the Company or its Subsidiaries under any Environmental Law, which
noncompliance or Liability would, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
(c) There are no liens or encumbrances on any of the Company
Properties which arose pursuant to or in connection with any Environmental
Law or Environmental Claim and, to the Company's knowledge, no government
actions have been taken or threatened to be taken or are in process which
are reasonably likely to subject any Company Property to such liens or
other encumbrances.
(d) Except as disclosed in Schedule 3.12(d) (none of which
matters would, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect), or set forth in the Company Environmental
Reports, no Environmental Claim has been asserted or, to the Company's
knowledge, threatened that may result in a Liability in excess of $100,000
with respect to the operations or the businesses of the Company or its
Subsidiaries, or with respect to the Company Properties. Except as set
forth in the Company Environmental Reports, no circumstances, past or
present actions, conditions, events or incidents which exist with respect
to the Company or its Subsidiaries or the Company Properties that would
reasonably be expected to result in any such Environmental Claim in excess
of $100,000 being asserted, in any such case, against (i) the Company or
its Subsidiaries, or (ii) to the Company's knowledge, any person whose
liability for any Environmental Claims the Company or its Subsidiaries has
or may have retained or assumed either contractually or by operation of
law.
(e) Except as disclosed in Schedule 3.12(e) (none of which
matters would, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect), or set forth in the Company Environmental
Reports, (i) none of the Company or its Subsidiaries has been notified or
anticipates being notified of potential responsibility in connection with
any site that has been placed on, or proposed to be placed on, the National
Priorities List or its state or foreign equivalents pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. ss. 9601 et seq., or analogous state laws, (ii) no
Materials of Environmental Concern are present on, in or under any Company
Property in a manner or condition that is reasonably likely to give rise to
an Environmental Claim which would reasonably be expected to result in a
Material Adverse Effect, (iii) none of the Company or its Subsidiaries has
Released or arranged for the Release of any Materials of Environmental
Concern at any location to an extent or in a manner which would reasonably
be expected to result in a Material Adverse Effect, (iv) no underground
storage tanks, surface impoundments, disposal areas, pits, ponds, lagoons,
open trenches or disused industrial equipment is present at any of the
Company Properties in a manner or condition that is reasonably likely to
give rise to an Environmental Claim which would reasonably be expected to
result in a Material Adverse Effect, (v) no transformers, capacitors or
other equipment containing fluid with more than 50 parts per million
polychlorinated biphenyls are present at any of the Company Properties in a
manner or condition that is reasonably likely to give rise to an
Environmental Claim which would reasonably be expected to result in a
Material Adverse Effect, except for any such transformers, capacitors or
other equipment owned by any utility company, and (vi) except as set forth
on Schedule 3.12(e) to the Company's knowledge no friable asbestos and no
friable asbestos-containing material is present at any of the Company
Properties and no Employee, agent, contractor or subcontractor of the
Company or its Subsidiaries or any other person is now or has in the past
been exposed to friable asbestos at any Company Property, except, in the
case of each of the matters set forth in this subpart (vi), for such
matters as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(f) Schedule 3.12(f) contains a list of each environmental
report prepared for the Company or its Subsidiaries or otherwise in the
possession of any of them with respect to the environmental condition of
any of the Company Properties (collectively, the "Company Environmental
Reports"). The Company has previously delivered or made available to Buyer
true and complete copies of each Company Environmental Report. To the
Company's knowledge, none of the matters disclosed by the Company
Environmental Reports would, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect. The Company has no
knowledge of any facts or circumstances relating to the environmental
condition of any property owned, leased or otherwise held by the Company
that is not a Company Property that are reasonably likely to result in a
Material Adverse Effect.
(g) For purposes hereof, the terms listed below shall have
the following meanings:
(i) "Claim" shall mean all actions, causes of action, suits,
judgments, executions, claims, Liabilities and demands
whatsoever, in law or equity.
(ii) "Environmental Claim" shall mean any Claim
investigation or notice by any person alleging potential
liability (including potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources
damages, property damages, personal injuries or fatalities, or
penalties) arising out of, based on or resulting from (A) the
presence, generation, transportation, treatment, use, storage,
disposal or Release of Materials of Environmental Concern or the
threatened Release of Materials of Environmental Concern at any
location, or (B) activities or conditions forming the basis of
any violation, or alleged violation of, or liability or alleged
liability under, any Environmental Law.
(iii) "Environmental Laws" shall mean federal, state, and
local laws, ordinances, common law, orders, statutes, and
regulations relating to the pollution or protection of the
environment or of flora or fauna or their habitat or of human
health and safety, or to the cleanup or restoration of the
environment.
(iv) "Materials of Environmental Concern" shall mean all
chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum or any fraction thereof, petroleum products and
hazardous substances or solid or hazardous wastes as now defined
and regulated under any Environmental Laws.
(v) "Release" shall mean any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration.
Section 3.13 Employees and Employee Benefit Plans.
(a) Schedule 3.13(a) sets forth a complete and accurate list
of all employment agreements between the Company or any of its Subsidiaries
and employees of the Company or any of its Subsidiaries. Except for the
employees who are parties to such employment agreements, all of the
employees of the Company and each of its Subsidiaries are employed on an
at-will basis (except for restrictions or limitations on the at-will basis
of such employees imposed by law or equity or general principles of law or
equity).
(b) Schedule 3.13(b) sets forth a complete and accurate list
of all Employee Benefit Plans and all material Benefit Arrangements which
cover Employees of the Company or any of its Subsidiaries with respect to
their employment relationship with the Company or any of its Subsidiaries
(the "Company Plans"). With respect to each
Company Plan, the Company has made available to Buyer true and complete
copies of: (i) the plans and related trust documents and amendments
thereto, (ii) the most recent summary plan descriptions, if any, and the
most recent annual report, if any, and (iii) the most recent actuarial
valuation (to the extent applicable).
(c) With respect to each Company Plan, (i) the Company and
each of its Subsidiaries is in compliance in all material respects with the
terms of each Company Plan and with the requirements prescribed by all
applicable statutes, orders or governmental rules or regulations, (ii) the
Company and each of its Subsidiaries has contributed to each Pension Plan
included in the Company Plans not less than the amounts accrued for such
plan for all plan periods for which payment is due, (iii) none of the
Company or any of its Subsidiaries has any funding commitment or other
accrued liabilities except as set forth on Schedule 3.13(c) or as reserved
for in the financial statements in or incorporated by reference into the
Company Reports, and (iv) there are and have been no prohibited
transactions involving any Company Plan and in the case of each of clauses
(i), (ii), (iii) and (iv), except for such matters as would not,
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect.
(d) Except as set forth on Schedule 3.13(d), none of the
Company or any of its Subsidiaries has made any commitment to establish any
new Employee Benefit Plan, to modify any Employee Benefit Plan, or to
increase benefits or compensation of Employees of the Company or any of its
Subsidiaries (except for normal increases in compensation consistent with
past practices), and to the Company's knowledge, no intention to do so has
been communicated to Employees of the Company or any of its Subsidiaries.
(e) There are no pending or, to the Company's knowledge,
anticipated claims (excluding claims for benefits incurred in the ordinary
course of Company Plan activities) against or otherwise involving any of
the Company Plans or any fiduciaries thereof with respect to their duties
to the Company Plans and no suit, action or other litigation (excluding
claims for benefits incurred in the ordinary course of Company Plan
activities) has been brought against or with respect to any such Company
Plans.
(f) Neither the Company nor any of the ERISA Affiliates has,
at any time after September 25, 1980, contributed to, or been required to
contribute to, any "multiemployer plan" (as defined in Sections 3(37) and
4001(a)(3) of ERISA).
(g) Except as required by the continuation coverage
requirements of Section 601 et seq. of ERISA and Section 4980B of the Code
or requirements of state law and regulations and except as set forth on
Schedule 3.13(g), the Company and its Subsidiaries do not maintain or
contribute to any plan or arrangement which provides or has any liability
to provide life insurance, medical or other employee welfare benefits
described in Section 3(l) of ERISA to any Employee or former Employee
following his retirement or termination of employment and, to the Company's
knowledge, the Company and its Subsidiaries have never represented,
promised or contracted (whether in oral or written form) to any Employee or
former Employee that such benefits would be provided.
(h) For purposes hereof, "Employee Benefit Plans" means each
and all "employee benefit plans" as defined in Section 3(3) of ERISA
maintained or contributed to by the Company or a Subsidiary or in which the
Company or a Subsidiary participates or participated and which provides
benefits to Employees, including (i) any such plans that are "employee
welfare benefit plans" as defined in Section 3(l) of ERISA, including
retiree medical and life insurance plans ("Welfare Plans"), and (ii) any
such plans that constitute "employee pension benefit plans" as defined in
Section 3(2) of ERISA ("Pension Plans").
"Benefit Arrangements" means life and health insurance, hospitalization,
savings, bonus, deferred compensation, incentive compensation, holiday,
vacation, severance pay, sick pay, sick leave, disability, tuition refund,
service award, company car, scholarship, relocation, patent award, fringe
benefit, individual employment, consultancy or severance contracts and
other polices or practices of the Company or a Subsidiary providing
employee or executive compensation or benefits to Employees maintained or
contributed to by the Company or a Subsidiary, other than Employee Benefit
Plans. "Employees" mean all current employees, former employees and retired
employees of the Company or any of its Subsidiaries, including employees on
disability, layoff or leave status. "Controlled Group Liability" means any
and all liabilities (other than such liabilities that arise solely out of,
or relate solely to, the Company Plans) of the ERISA Affiliates (other than
the Company and its Subsidiaries) under (i) Title IV of ERISA, (ii) Section
302 of ERISA, (iii) Sections 412 and 4971 of the Code, (iv) the
continuation coverage requirements of Section 601 et seq. of ERISA and
Section 4980B of the Code, and (v) corresponding or similar provisions of
foreign laws or regulations.
(i) To the Company's knowledge, with respect to each Company
Plan that is subject to Title IV or Section 302 of ERISA or Section 412 or
4971 of the Code: (i) there does not exist any accumulated funding
deficiency within the meaning of Section 412 of the Code or Section 302 of
ERISA, whether or not waived, (ii) the fair market value of the assets of
such plan equals or exceeds the actuarial present value of all accrued
benefits under such plan, on a termination basis, (iii) no reportable event
within the meaning of Section 4043(c) of ERISA has occurred, and the
consummation of the transactions contemplated by this Agreement will not
result in the occurrence of any such reportable event, and (iv) all
premiums due to the Pension Benefit Guaranty Corporation have been timely
paid in full.
(j) There does not now exist, nor do any circumstances exist
that could result in, any Controlled Group Liability that would be a
liability of the Company following the Closing. Without limiting the
generality of the foregoing, neither the Company nor any ERISA Affiliate
has engaged in any transaction described in Section 4069 or Section 4204 of
ERISA.
(k) Except as set forth in Schedule 3.13(k), neither the
execution and delivery of this Agreement and the Transaction Documents nor
the consummation of the transactions contemplated hereby or thereby will
(either alone or in conjunction with any other event) result in, cause the
accelerated vesting or delivery of, or increase the amount or value of, any
payment or benefit to any employee of the Company.
Section 3.14 Labor Matters. Except as set forth in Schedule 3.14,
none of the Company or any of its Subsidiaries is a party to, or bound by,
any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor union organization. Except for
the matters set forth in Schedule 3.14 (none of which matters would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect), there is no unfair labor practice or labor arbitration
proceeding pending or, to the knowledge of the Company, threatened against
the Company or any of its Subsidiaries. To the Company's knowledge, there
are no organizational efforts with respect to the formation of a collective
bargaining unit presently being made or threatened involving employees of
the Company or any of its Subsidiaries.
Section 3.15 Affiliate Transactions. Schedule 3.15 sets forth a
complete and accurate list of all transactions, series of related
transactions or currently proposed transactions or series of related
transactions entered into by the Company or any of its Subsidiaries since
January 1, 1997 which are of the type required to be disclosed by the
Company pursuant to Item 404 of Regulation S-K of the Securities Laws. A
true and complete copy of all agreements or contracts relating to any such
transaction have been made available to Buyer prior to the date hereof.
Section 3.16 Insurance. The Company maintains insurance policies,
including liability policies, covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company
and each of its Subsidiaries (collectively, the "Insurance Policies"),
which are of a type and in amounts customarily carried by persons
conducting businesses similar to those of the Company. Schedule 3.16 sets
forth a complete and accurate summary of the Insurance Policies. There is
no material claim by the Company or any of its Subsidiaries pending under
any of the material Insurance Policies as to which coverage has been
questioned, denied or disputed by the underwriters of such policies.
Section 3.17 Proxy Statement. The Proxy Statement and all of the
information included or incorporated by reference therein (other than any
information supplied or to be supplied by Buyer for inclusion or
incorporation by reference therein) will not, as of the date such Proxy
Statement is first mailed to the stockholders of the Company and as of the
time of the meeting of the stockholders of the Company in connection with
the transactions contemplated hereby, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Proxy
Statement will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations promulgated by
the SEC thereunder.
Section 3.18 Regulatory Compliance.
(a) Compliance with Law. Except as set forth in Schedule
3.18(a), to the knowledge of the Company, neither the Company nor any
Subsidiary is the subject of any investigation, nor has any investigation
or prosecution or other action been threatened by any Governmental Entity
or any private entity or person regarding non-compliance with any Law and
no basis exists for any such investigation or prosecution. None of the
Company, any of the Subsidiaries, or any individual employed by the Company
or any of the Subsidiaries, to the knowledge of the Company, may reasonably
be expected to have criminal culpability or to be excluded from
participation in any Medical Reimbursement Program for its or his corporate
or individual actions or failure to act. To the Company's knowledge, there
is no executive officer of the Company or any Subsidiary continuing to be
employed by the Company or any of the Subsidiaries who may reasonably be
expected to have individual culpability for matters under investigation by
the OIG or other Governmental Entity.
(b) Billing. Current billing policies, arrangements,
protocols, and instructions comply in all material respects with
requirements of Medical Reimbursement Programs and are administered by
properly trained personnel, except as set forth in Schedule 3.18(b). The
Company and each Subsidiary has complied with all applicable Medicare and
all other third party pay or billing policies, procedures, limitations and
restrictions, and there is no pending or threatened recoupment or penalty
action or proceedings against the Company or any Subsidiary under the
Medicare program or by any other third party payor, except for such
non-compliance, actions or proceedings that individually or in the
aggregate would not have a Material Adverse Effect. The Company's current
operations do not require compliance with Blue Cross/Blue Shield, Medicaid
or CHAMPUS policies, procedures, limitations or restrictions.
(c) Licenses and Permits. The Company and each of the
Subsidiaries has obtained, and maintain in force, all Permits required from
any Governmental Entity to operate their respective businesses and to
occupy, operate and use any buildings, improvements, fixtures and equipment
owned or leased in connection with the operation of assisted living
facilities to provide the level one, two and three services described in
the Company's 1997 Form 10-K at all locations by the Company or any of the
Subsidiaries, and all such Permits are valid and in full force and effect
and shall remain so upon consummation of the transactions contemplated by
this Agreement with only such exceptions that would not, individually or in
the aggregate, have a Material Adverse Effect. All of the Permits
referenced in the foregoing sentence have been issued in the name of the
Company or the applicable Subsidiary or Affiliated Limited Partnership
having an ownership or leasehold interest in the facilities referenced
therein. The Company's Subsidiary, Pro Motive Rehabilitative Services,
Inc., has a valid license to provide rehabilitation therapy services under
Part B of the Medicare Program. No Permits of the Company or any Subsidiary
have been suspended, canceled or terminated and, to the knowledge of the
Company, no suspension, cancelation or termination of any such Permits is
threatened or imminent. Each employee of the Company and of each of the
Subsidiaries (including, but not limited to, each facility administrator)
has obtained, and maintains in force, all licenses, permits or similar
authorizations required to authorize such employee to perform his or her
duties on behalf of the Company and the Subsidiaries with only such
exceptions that, individually and in the aggregate, would not have a
Material Adverse Effect.
(d) Certain Payments. Neither the Company nor any
Subsidiary, nor any director, officer or employee of the Company or any
Subsidiary acting for or on behalf of the Company or any Subsidiary, has
paid or caused to be paid, directly or indirectly, in connection with the
business of the Company or any Subsidiary: (i) any bribe, kickback or other
similar payment to any Governmental Entity or any agent of any supplier or
customer; or (ii) any contribution to any political party or candidate
(other than from personal funds of directors, officers or employees not
reimbursed by their respective employers or as otherwise permitted by
applicable law).
(e) Third Party Payors; Medicare. To the extent required in
the ordinary course of their business, the Company and each Subsidiary is
qualified for the conduct of the Company's business in the ordinary and
regular course, for participation in the Medicare program and is a party to
provider agreements for such programs which are in full force and effect
with no events of default having occurred thereunder, except as set forth
in Schedule 3.18(e) and such exceptions that would not, individually or in
the aggregate, have a Material Adverse Effect. The Company and each of the
Subsidiaries has filed or will timely file all claims or other reports
required to be filed with respect to the purchase of services by
third-party payors, including, but not limited to, the Medical
Reimbursement Programs. All such claims or reports are or will be complete
and accurate in all material respects. The Company and each of the
Subsidiaries has paid or has properly recorded on the Company's financial
statements all actually known and undisputed refunds, discounts or
adjustments which have become due pursuant to such claims, and neither the
Company nor any Subsidiary has any material liability to any payor with
respect thereto, except as has been fully reserved for in the Company's
financial statements. Except as set forth in Schedule 3.18(e), there are no
pending appeals, overpayment determinations, adjustments, challenges,
audits, litigation, or notices of intent to reopen Medicare claims
determinations or other reports required to be filed by the Company or any
Subsidiary in order to be paid by a payor for services rendered. Neither
the Company nor any of the Subsidiaries, nor any of their respective
directors, officers, employees, partners, consultants or stockholders has
been convicted of, or pled guilty or nolo contendere to, patient abuse or
neglect, or any other Medicare program-related
offense. Neither the Company nor any of the Subsidiaries, nor any of their
respective directors, officers, stockholders, or to the Company's
knowledge, their current employees, partners or consultants, has committed
any offense which may serve as the basis for suspension or exclusion from
the Medicare program, including, but not limited to, defrauding a
government program, loss of a license to provide health care services, and
failure to provide quality care.
(f) Fraud and Abuse. The Company, each of the Subsidiaries,
and their respective directors, officers and employees and the other
persons and entities providing professional services for the Company and
the Subsidiaries, have not engaged in any activities which are in violation
of Sections 1128A, 1128B, 1128C or 1877 of the Social Security Act (42
U.S.C. xx.xx. 1320a-7a, 1320a-7b, 1320a-7c and 1395nn), the False Claims
Act (31 U.S.C. ss. 3729 et seq.), the False Statements Acts (18 U.S.C. ss.
2002), the Program Fraud Civil Penalties Act (31 U.S.C. ss. 3801 et seq.),
California Business and Professions Code xx.xx. 650, 650.01 and 650.01,
California Labor Code xx.xx. 139.3 and 139.31, California Health and Safety
Code ss. 445, California Welfare and Institutions Code xx.xx. 14107,
14107.2 and 14107.3, or related regulations or other federal or state laws
and regulations, including, but not limited to, the following:
(i) knowingly and wilfully making or causing to be made a
false statement or representation of a material fact in any
application for any benefit or payment;
(ii) knowingly and wilfully making or causing to be made a
false statement or representation of a material fact for use in
determining rights to any benefit or payment;
(iii) failure to disclose knowledge by a Medicare or
Medicaid claimant or a claimant under any Medical Reimbursement
Program of the occurrence of any event affecting the initial or
continued right to any benefit or payment on its own behalf or on
behalf of another, with intent to fraudulently secure such
benefit or payment;
(iv) knowingly and wilfully offering, paying, soliciting or
receiving any renumeration (including any kickback, bribe, or
rebate), directly or indirectly, overtly or covertly, in cash or
in kind (i) in return for referring an individual to a person for
the furnishing or arranging for the furnishing of any item or
service for which payment may be made in whole or in part by any
Medical Reimbursement Program or (ii) in return for purchasing,
leasing, or ordering, or arranging for or recommending
purchasing, leasing, or ordering any good, facility, service, or
item for which payment may be made in whole or in part by any
Medical Reimbursement Program; or
(v) referring or billing a patient for designated health
services (as defined in 42 U.S.C. ss. 1395nn) or providing
designated health services to a patient upon a referral from an
entity or person with which the physician or an immediate family
member has a financial relationship, and to which no exception
under 42 U.S.C. ss. 1395nn applies.
Section 3.19 Vote Required. The affirmative vote of the holders
of a majority (including the Advancing Party and its Controlled Affiliates
(as defined in the Stockholders Agreement) for purposes of determining a
quorum and for determining a majority) of the outstanding shares of Company
Common Stock entitled to vote hereon and duly present in person or by proxy
at a meeting duly called to vote (and with each share of Company Common
Stock entitled to one vote per share) is the only vote of the holders of
any class or series of Company Stock necessary to approve the election of
the existing Directors and the Investor Nominees as contemplated by this
Agreement and the Transaction Documents.
Section 3.20 Brokers or Finders. No agent, broker, investment
banker or other firm or person, including any of the foregoing that is an
Affiliate of the Company, is or will be entitled to any broker's or
finder's fee or any other commission or similar fee from the Company in
connection with this Agreement or the Transaction Documents or any of the
transactions contemplated hereby or thereby for which Buyer or any of its
Affiliates will be responsible other than Salomon Brothers Inc (the
"Broker"). The fee of the Broker shall be paid by the Company pursuant to a
separate agreement between the Company and the Broker. The Company agrees
to indemnify and hold harmless Buyer and its successors and assigns from
and against any and all claims, losses, liabilities and expenses, including
without limitation reasonable attorneys' fees, disbursements and charges,
arising out of any claim or demand for commissions or other compensation
for bringing about this transaction by any agent, broker, investment banker
or other firm or person, including without limitation the Broker, who
claims to have dealt with the Company in connection with this Agreement or
the Transaction Documents or any of the transactions contemplated hereby or
thereby.
Section 3.21 Knowledge Defined. As used herein, the phrase "to
the Company's knowledge" (or words of similar import) means the actual
knowledge of any of Xxxx X. Booty, Xxxxx X. Xxxxxxx, Xxxxxx X.
Xxxxxx-Xxxxx, Xxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxxx, Xxxx X. Xxxxxxxx,
Xxxxx Xxxxxxx and each president of each division of the Company and
includes any facts, matters or circumstances (i) set forth in the files
maintained by such person, (ii) that would be known by such persons after
the exercise of reasonable inquiry and (iii) set forth in any written
notice from any Government Authority or any other material written notice
received by the Company or any of its Subsidiaries from any other person,
and also including any matter of which Buyer informs the Company in
writing.
Section 3.22 Certain Information. If Buyer has obtained knowledge
prior to the Closing that any of the representations or warranties of the
Company set forth in this Article 3 are untrue in any respect and Buyer
nevertheless elects to acquire Company Notes at the Closing, then such
breach shall be deemed to have been waived by the Buyer and the Company
shall have no liability to Buyer in respect thereof. For the purposes of
this Section, Buyer shall be deemed to have knowledge of any such matter
only if (i) such matter is set forth in a Schedule to this Agreement
including Schedule 3.22, (ii) such matter was set forth in a letter,
memorandum or other written communication from the Company that
specifically states that such letter, memorandum or other written
communication is being delivered pursuant to this Section 3.22 or (iii)
Buyer has actual knowledge of such matter as a result of its due diligence
review contemplated by this Agreement or otherwise.
ARTICLE 4
Representations and Warranties of Buyer and the Advancing Party
Buyer and the Advancing Party hereby jointly and severally
represent and warrant to the Company as follows:
Section 4.1 Organization.
(a) Buyer is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
Delaware. Buyer has all requisite power and authority to enter into this
Agreement and the Transaction Documents to which it is a party and to
perform its obligations hereunder and thereunder.
(b) The Advancing Party is a limited liability company duly
organized, validly existing and in good standing under the laws of the
State of Delaware. The Advancing Party has all requisite power and
authority to enter into this Agreement and the Transaction Documents to
which it is a party and to perform its obligations hereunder and
thereunder.
Section 4.2 Due Authorization. The execution, delivery and
performance of this Agreement and the Transaction Documents to which Buyer
and the Advancing Party are parties have been duly and validly authorized
by all necessary action on the part of Buyer and the Advancing Party. This
Agreement and the Transaction Documents to which Buyer and the Advancing
Party are parties have been duly executed and delivered by each of Buyer
and the Advancing Party for itself and constitute the valid and legally
binding obligations of Buyer and the Advancing Party, enforceable against
Buyer or the Advancing Party, as the case may be, in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights or general principles of equity.
Section 4.3 Conflicting Agreements and Other Matters. Neither the
execution and delivery of this Agreement nor the performance by Buyer or
the Advancing Party, as the case may be, of its obligations hereunder will
conflict with, result in a breach of the terms, conditions or provisions
of, constitute a default under, result in the creation of any mortgage,
security interest, encumbrance, lien or charge of any kind upon any of the
properties or assets of Buyer or the Advancing Party, as the case may be,
pursuant to, or require any consent, approval or other action by or any
notice to or filing with any Government Authority pursuant to, the
organizational documents or agreements of Buyer or the Advancing Party, as
the case may be, or any agreement, instrument, order, judgment, decree,
statute, law, rule or regulation by which Buyer or the Advancing Party, as
the case may be, is bound, except for filings after the Closing under
Section 13(d) or Section 16 of the Exchange Act.
Section 4.4 Acquisition for Investment; Sophistication; Source of
Funds.
(a) Buyer is acquiring the Company Notes being purchased by
it for its own account for the purpose of investment and not with a view to
or for sale in connection with any distribution thereof, and Buyer has no
present intention or plan to effect any distribution of the Company Notes,
provided that the disposition of Company Notes owned by Buyer shall at all
times be and remain within its control, subject to the provisions of this
Agreement and the Transaction Documents.
(b) Buyer is able to bear the economic risk of the
acquisition of Company Common Stock pursuant hereto and can afford to
sustain a total loss on such investment, and has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of the proposed investment. On the
Settlement Date, the Advancing Party shall have available and shall advance
to Buyer all of the funds necessary to satisfy Buyer's obligations
hereunder and to pay any related fees and expenses in connection with the
foregoing.
(c) Each of Buyer and the Advancing Party is an "accredited
investor" as such term is defined in Regulation D promulgated under the
Securities Act.
Section 4.5 Proxy Statement. None of the information supplied or
to be supplied by Buyer for inclusion or incorporation by reference in the
Proxy Statement will, as of the date the Proxy Statement is first mailed to
the stockholders of the Company and as of the time of the meeting of the
stockholders of the Company in connection with the transactions
contemplated hereby, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
Section 4.6 Brokers or Finders. No agent, broker, investment
banker or other firm or person, including any of the foregoing that is an
Affiliate of Buyer, or the Advancing Party, is or will be entitled to any
broker's or finder's fee or any other commission or similar fee from Buyer
or the Advancing Party in connection with this Agreement or any of the
transactions contemplated hereby for which the Company or any of its
Affiliates will be responsible. Buyer agrees to indemnify and hold harmless
the Company from and against any and all claims, losses, liabilities and
expenses, including without limitation reasonable attorneys' fees,
disbursements and charges, arising out of any claim or demand for
commissions or other compensation for bringing about this transaction by
any agent, broker, investment banker or other firm or person (excluding the
Broker) who claims to have dealt with the Buyer in connection with this
Agreement or the Transaction Documents or any of the transactions
contemplated hereby or thereby.
Section 4.7 Investment Company Matters. Neither the Advancing
Party nor Buyer is, and after giving effect to the purchase of Company
Common Stock contemplated hereby neither will be, an "investment company"
or an entity "controlled" by an "investment Company", as such terms are
defined in the Investment Company Act of 1940, as amended.
ARTICLE 5
Covenants Relating to Closing
Section 5.1 Taking of Necessary Action.
(a) Each party hereto agrees to take or cause to be taken
all action and promptly to do or cause to be done all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement and the
Transaction Documents, subject to the terms and conditions hereof and
thereof, including all actions and things necessary to cause all conditions
precedent set forth in Article 7 to be satisfied.
(b) As promptly as practicable after the date hereof, the
Company shall prepare and file with the SEC a preliminary proxy statement
(the "Proxy Statement") by which the Company's stockholders will be asked
to approve, among other things, the election of the existing Directors and
the Investor Nominees as contemplated by this Agreement and the Transaction
Documents. The Proxy Statement as initially filed with the SEC, as it may
be amended and refiled with the SEC and as it may be mailed to the
Company's stockholders, shall be in form and substance reasonably
satisfactory to Buyer. The Company shall use its reasonable efforts to
respond to any comments of the SEC and to cause the Proxy Statement to be
mailed to the Company's stockholders at the earliest practicable time. As
promptly as practicable after the date hereof, the Company shall prepare
and file any other filings required of the Company or its Subsidiaries
under the Exchange Act, the Securities Act or any other federal, state or
local laws relating to this Agreement and the transactions contemplated
hereby, and state takeover laws (the "Other Filings"). The Company and
Buyer will notify each other promptly of the receipt of any comments from
the SEC or its staff and of any request by the SEC or its staff or any
other government officials for amendments or supplements to the Proxy
Statement or any Other Filing or for additional information and will supply
each other with copies of all correspondence between each of them or any of
their respective representatives, on the one hand, and the SEC, or its
staff or any other government officials, on the other hand, with respect to
the Proxy Statement or any Other Filing. The Proxy Statement and any Other
Filing shall comply in all material respects with all applicable
requirements of law. Buyer shall provide the Company all information about
Buyer (including the Investor Nominees) required to be included or
incorporated by reference in the Proxy Statement or any Other Filing and
shall otherwise cooperate with the Company in taking the actions described
in this paragraph. Whenever any event occurs which is required to be set
forth in an amendment or supplement to the Proxy Statement or any Other
Filing, the Company or Buyer, as the case may be, shall promptly inform the
other party of such occurrence and cooperate in filing with the SEC or its
staff or any other government officials, and/or mailing to stockholders of
the Company, such amendment or supplement.
(c) The Company shall call a meeting of its stockholders to
be held as promptly as practicable for the purpose, among other things, of
voting upon the election of directors as contemplated by this Agreement and
the Transaction Documents.
(d) The Company shall use commercially reasonable efforts to
obtain estoppel certificates addressing certain issues identified in
writing to the Company by Buyer in form and substance reasonably
satisfactory to Buyer from the applicable landlords under the following
leases: NHP leases, Meditrust and Healthcare REIT leases and HCPI leases.
Section 5.2 Registration Rights Agreement. Concurrent with the
execution of this Agreement, the Company, the Advancing Party and Buyer
shall enter into the Registration Rights Agreement.
Section 5.3 Stockholders Agreement. Concurrent with the execution
of this Agreement, the Company, the Advancing Party and Buyer shall enter
into the Stockholders Agreement.
Section 5.4 Public Announcements; Confidentiality.
(a) Subject to each party's disclosure obligations imposed
by law and any stock exchange or similar rules and the confidentiality
provisions contained in Section 5.4(b), all news releases and other public
information disclosures with respect to this Agreement and the Transaction
Documents and any of the transactions contemplated
hereby or thereby will require the mutual approval of Buyer and the Company
before such release or disclosure is made. If a party is required by law or
any stock exchange or similar rule to issue a news release or other public
announcement, it shall advise the other party in advance thereof and use
reasonable best efforts to cause a mutually agreeable release or
announcement to be issued.
(b) Buyer agrees that all information provided to Buyer or
any of its representatives pursuant to this Agreement shall be kept
confidential, and Buyer shall not (x) disclose such information to any
persons other than the directors, officers, employees, financial advisors,
investors, lenders, legal advisors, accountants, consultants and affiliates
of Buyer who reasonably need to have access to the confidential information
and who are advised of the confidential nature of such information or (y)
use such information in a manner which would be detrimental to the Company;
provided, however, the foregoing obligation of Buyer shall not (i) relate
to any information that (1) is or becomes generally available other than as
a result of unauthorized disclosure by Buyer or by persons to whom Buyer
has made such information available, (2) is or becomes available to Buyer
on a nonconfidential basis from a third party that is not, to Buyer's
knowledge, bound by any other confidentiality agreement with the Company,
or (ii) prohibit disclosure of any information if required by law, rule,
regulation, court order or other legal or governmental process.
(c) In the event that Buyer is requested or required (by
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process) to disclose any of the
confidential information, Buyer shall provide the Company with prompt
written notice so that the Company may seek a protective order or other
appropriate remedy. In the event such protection or other remedy is not
obtained and Buyer is required to provide such confidential information or
stand subject to contempt or other censure or penalty, Buyer shall give the
Company written notice of the confidential information to be disclosed as
far in advance of its disclosure as is practicable and, upon the Company's
request and at the Company's expense, use its reasonable efforts to obtain
assurances that confidential treatment will be accorded to such
confidential information. In the event such information is requested, or is
the subject of a subpoena, pursuant to an informal or formal inquiry or
investigation by the SEC, any U.S. state securities or blue sky authority,
and U.S. or foreign stock exchange or regulatory authority, Buyer shall be
free to disclose such information thereto without a protective order.
(d) Buyer and the Company agree that money damages would not
be a sufficient remedy for any breach of the Agreement by the other party
or its representatives and that in addition to all other remedies the
Company shall be entitled to specific performance and injunctive or other
equitable relief as a remedy for any such breach, Buyer further agrees to
waive and to use its best efforts to cause its representatives to waive an
requirement for the securing or posting of any bond in connection with such
remedy.
Section 5.5 No Solicitation of Transactions. Unless and until
this Agreement is terminated in accordance with its terms, none of the
Company or its Subsidiaries shall, directly or indirectly, through any
officer, director, agent or otherwise, initiate, solicit or knowingly
encourage (including by way of furnishing non-public information or
assistance), or take any other action to facilitate knowingly, any
inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Competing Transaction, or enter into or
maintain or continue discussions or negotiate with any person or entity in
furtherance of such inquiries or to obtain a Competing Transaction, or
agree to or endorse any Competing Transaction, or authorize or knowingly
permit any of the officers, directors or employees of such party or any of
its Subsidiaries or any investment
banker, financial advisor, attorney, accountant or other representative
retained by such party or any of such party's Subsidiaries to take any such
action, and the Company shall notify Buyer orally (within one Business Day)
and in writing (as promptly as practicable) of all of the relevant details
relating to all inquiries and proposals which any officer or director of
the Company may receive relating to any of such matters and if such inquiry
or proposal is in writing, the Company shall deliver to Buyer a copy of
such inquiry or proposal; provided, however, that nothing contained in this
Section shall prohibit the Board from complying with Rule 14e-2 promulgated
under the Exchange Act with regard to a tender or exchange offer or
prohibit the Board from taking such other actions as may be required to
comply with its fiduciary obligations. If the Board determines with the
advice of counsel that failure to do so could be held to violate its
fiduciary duties, it may provide information in response to an unsolicited
proposal. If the Company receives a bona fide proposal for a Competing
Transaction that the Board determines in good faith (based on the advice of
a nationally recognized financial advisor) may provide greater value to the
Company and its stockholders than the transactions contemplated by this
Agreement, it may enter into negotiations with respect to such proposal.
The Company will notify Buyer of any such superior proposal not less than
two Business Days prior to entering into any definitive agreement with
respect to a Competing Transaction; provided, however, that in no event
shall the Company enter into a definitive agreement with respect to a
Competing Transaction less than five Business Days after the Company's
initial notification to Buyer of an inquiry or proposal relating to a
Competing Transaction. Within the two-Business-Day or five-Business-Day
period referred to above, Buyer may propose an improved transaction.
Section 5.6 Information and Access. Unless and until this
Agreement is terminated in accordance with its terms, (i) the Company and
its Subsidiaries shall afford to Buyer and Buyer's accountants, counsel and
other representatives full and reasonable access during normal business
hours (and at such other times as the parties may mutually agree) to its
properties, books, contracts, commitments, records and personnel and,
during such period, shall furnish promptly to Buyer (1) a copy of each
report, schedule and other document filed or received by it pursuant to the
requirements of the Securities Laws, and (2) all other information
concerning their businesses, personnel and the Company Properties as Buyer
may reasonably request, and (ii) without limiting the generality of the
foregoing, Buyer shall have the right to (1) conduct or cause to be
conducted an environmental, physical, structural, electrical, mechanical
and other inspection and review of any Company Properties, for which
inspection Buyer will and hereby does indemnify and hold the Company
harmless from any and all damages whatsoever caused by such inspection, or
(2) request that the Company update, at Buyer's expense, any existing
reports, reviews or inspections thereof, in which case the Company shall
promptly so update its reports, reviews and inspections and cause them to
be certified to Buyer by the firm or person who prepared such report or
conducted such review or inspection. Buyer and its accountants, counsel and
other representatives shall, in the exercise of the rights described in
this Section, not unduly interfere with the operation of the businesses of
the Company or its Subsidiaries.
ARTICLE 6
Certain Additional Covenants
Section 6.1 Resale. Buyer acknowledges and agrees that the
Company Notes that Buyer will acquire will not be registered under the
Securities Act and may only be sold or otherwise disposed of in one or more
transactions registered under the Securities Act and, where applicable,
relevant state securities laws or as to which an exemption from the
registration requirements of the Securities Act and, where applicable, such
state securities laws is available, and Buyer agrees that the Company Notes
shall bear a legend with respect to the restrictions on transfer under the
Securities Act and under applicable state securities laws. Prior to any
proposed transfer of the Company Notes, unless such transfer is made
pursuant to an effective registration statement under the Securities Act,
Buyer will deliver to the Company an opinion of counsel, reasonably
satisfactory in form and substance to the Company, to the effect that the
Company Notes may be sold or otherwise transferred without registration
under the Securities Act. The Company will remove the legend relating to
Securities Act restrictions from any Company Common Stock acquired pursuant
to the Stock Purchase Agreement at any time two years after issuance if
Buyer delivers to the Company an opinion of counsel, reasonably
satisfactory in form and substance to the Company, to the effect that such
Company Common Stock is no longer subject to transfer restrictions under
the Securities Act. Until such time as such Company Common Stock shall have
been registered under the Securities Act or sold pursuant to Rule 144
promulgated thereunder (or any similar rule or regulation) each stock
certificate for such Company Common Stock shall bear any restricted
securities legend required pursuant to the Stockholders Agreement, unless
such legend is no longer required thereunder.
Section 6.2 Guarantee. The Advancing Party hereby unconditionally
and irrevocably guarantees and agrees to be responsible for the payment and
performance of all of Buyer's obligations hereunder.
ARTICLE 7
Conditions to Closing
Section 7.1 Conditions of the Closing. The obligation of Buyer to
purchase the Company Notes at the Closing is subject to satisfaction or
waiver of each of the following condition precedent:
Representations and Warranties; Covenants. The
representations and warranties of the Company contained herein shall be
true and correct in all respects on and as of the Closing Date with the
same effect as though such representations and warranties had been made on
and as of the Closing Date (except for representations and warranties that
speak as of a specific date or time other than the Closing Date (which need
only be true and correct in all respects as of such date or time)), other
than, in all such cases, such failures to be true and/or correct as would
not in the aggregate reasonably be expected to have a Material Adverse
Effect; provided, however, that if any of the representations and
warranties is already qualified in any respect by materiality or as to
Material Adverse Effect for purposes of this Section 7.1(a) such
materiality or Material Adverse Effect qualification will be in all
respects ignored (but subject to the overall standard as to Material
Adverse Effect set forth immediately prior to this proviso). The covenants
and agreements of the Company to be performed on or before the Closing Date
in accordance with this Agreement shall have been duly performed in all
respects, other than (except for the covenants set forth in Sections 5.2
and 5.3, as to which the proviso set forth in this other-than clause shall
not apply) for such failures to have been performed as would not in the
aggregate reasonably be expected to have a Material Adverse Effect
(provided, however that if any such covenant or agreement is already
qualified in any respect by materiality or as to Material Adverse Effect
for purposes of determining whether this condition has been satisfied, such
materiality or Material Adverse Effect or qualification will be in all
respects ignored and such covenant or agreement shall have been performed
in all respects without regard to such qualification (but subject to the
overall exception as
to Material Adverse Effect set forth immediately prior to this proviso)).
In making any determination as to Material Adverse Effect under this
Section 7.1, the matters set forth in such Section shall be aggregated and
considered together.
Section 7.2 Conditions of Sale. The obligation of the Company to
issue and sell the Company Notes at the Closing is subject to satisfaction
or waiver of the following condition precedent:
Representations and Warranties; Covenants. The
representations and warranties of Buyer and the Advancing Party contained
herein shall have been true and correct in all respects on and as of the
date hereof, and shall be true and correct in all respects on and as of the
Closing Date with the same effect as though such representations and
warranties had been made on and as of the Closing Date (except for
representations and warranties that speak as of a specific date or time
other than the Closing Date (which need only be true and correct in all
respects as of such date or time)), other than, in all such cases, such
failures to be true and/or correct as would not in the aggregate reasonably
be expected to have a Material Adverse Effect on the Company or Buyer's
ability to consummate the transactions contemplated hereby; provided,
however, that if any of the representations and warranties is already
qualified in any respect by materiality or as to Material Adverse Effect
for purposes of this Section 7.2(a) such materiality or Material Adverse
Effect qualification will be in all respects ignored (but subject to the
overall standard as to Material Adverse Effect set forth immediately prior
to this proviso). The covenants and agreement, of Buyer to be performed on
or before the Closing Date in accordance with this Agreement shall have
been duly performed in all respects, other than (except for Buyer's
covenants set forth in Sections 5.2 and 5.3, as to which the proviso set
forth in this other-than clause shall not apply) for such failures to have
been performed as would not in the aggregate reasonably be expected to have
a Material Adverse Effect on the Company or Buyer's ability to consummate
the transactions contemplated hereby (provided, however, that if any such
covenant or agreement is already qualified in any respect by materiality or
as to Material Adverse Effect for purposes of determining whether this
condition has been satisfied, such materiality or Material Adverse Effect
qualification will be in all respects ignored and such covenant or
agreement shall have been performed in all respects without regard to such
qualification (but subject to the overall exception as to Material Adverse
Effect set forth immediately prior to this proviso)).
ARTICLE 8
Survival; Indemnification
Section 8.1 Survival. Except as otherwise provided in this
Agreement, all representations, warranties and (except as provided by the
last sentence of this Section 8.1) covenants and agreements of the parties
contained herein, including indemnity or indemnification agreements
contained herein, or in any Schedule or Exhibit hereto, or any certificate,
document or other instrument delivered in connection herewith shall survive
the Closing until the first anniversary of the Closing. No Action or
proceeding may be brought with respect to any of the representations and
warranties, or any of the covenants or agreements which survive until such
first anniversary, unless written notice thereof, setting forth in
reasonable detail the claimed misrepresentation or breach of warranty or
breach of covenant or agreement, shall have been delivered to the party
alleged to have breached such representation or warranty or such covenant
or agreement prior to such first anniversary; provided, however, that, if
Buyer shall have complied with this Section 8.1, the damages for breach by
the Company of any of the representations and warranties, or any of the
covenants or agreements which survive until such first anniversary, shall
be
measured with respect to all of Buyer's purchases of Company Common Stock
and Company Notes hereunder and not with respect only to Buyer's purchases
under this Agreement (including purchases under the Stock Purchase
Agreement) made prior to such first anniversary, but such measurement shall
not in any event include any shares of Company Stock that Buyer may have
purchased other than from the Company. Those covenants or agreements that
contemplate or may involve actions to be taken or obligations in effect
after the Closing shall survive in accordance with their terms.
Section 8.2 Indemnification by Buyer or the Company.
(a) Subject to Section 8.1, from and after the Closing Date,
Buyer shall indemnify and hold harmless the Company, its successors and
assigns, from and against any and all damages, claims, losses, expenses,
costs, obligations, and liabilities, including liabilities for all
reasonable attorneys' fees and expenses (including attorney and expert fees
and expenses incurred to enforce the terms of this Agreement)
(collectively, "Loss and Expenses") suffered, directly or indirectly, by
the Company by reason of, or arising out of, (i) any breach as of the date
made or deemed made or required to be true of any representation or
warranty made by Buyer in or pursuant to this Agreement, or (ii) any
failure by Buyer or the Advancing Party to perform or fulfill any of its
covenants or agreements set forth herein. Notwithstanding any other
provision of this Agreement to the contrary, in no event shall Loss and
Expenses include a party's incidental or consequential damages.
(b) Subject to Section 8.1, from and after the Closing Date,
the Company shall indemnify and hold harmless Buyer, its successors and
assigns, from and against any and all Loss and Expenses, suffered, directly
or indirectly, by Buyer by reason of, or arising out of, (i) any breach as
of the date made or deemed made or required to be true of any
representation or warranty made by the Company in or pursuant to this
Agreement and any statements made in any certificate delivered pursuant to
this Agreement, or (ii) any failure by the Company to perform or fulfill
any of its covenants or agreements set forth herein. Notwithstanding any
other provision of this Agreement to the contrary, in no event shall Loss
and Expenses include a party's incidental or consequential damages.
(c) Notwithstanding the foregoing, (i) neither Buyer nor the
Company shall be responsible for any Loss and Expenses as provided by
paragraphs (a) and (b), respectively, of this Section 8.2 until the
cumulative aggregate amount of such Loss and Expenses suffered by Buyer or
the Company, as the case may be, exceeds $100,000, in which case Buyer or
the Company, as the case may be, shall then be liable for all such Loss and
Expenses, and (ii) the cumulative aggregate indemnity obligation of each of
Buyer and the Company under this Section 8.2 shall in no event exceed the
actual aggregate amount paid by Buyer for the shares of Company Common
Stock and Company Notes purchased by it from the Company pursuant to this
Agreement. Except with respect to third-party claims being defended in good
faith or claims for indemnification with respect to which there exists a
good faith dispute, the indemnifying party shall satisfy its obligations
hereunder within 30 days of receipt of a notice of claim under this Article
8.
Section 8.3 Third-Party Claims. If a claim by a third party is
made against an Indemnified Party and if such Indemnified Party intends to
seek indemnity with respect thereto under this Article, such Indemnified
Party shall promptly notify the indemnifying party in writing of such
claims setting forth such claims in reasonable detail; provided, however,
the foregoing notwithstanding, the failure of any Indemnified Party to give
any notice required to be given hereunder shall not affect such Indemnified
Party's right to
indemnification hereunder except to the extent the indemnifying party from
whom such indemnity is sought shall have been prejudiced in its ability to
defend the claim or action for which such indemnification is sought by
reason of such failure. The indemnifying party shall have 20 days after
receipt of such notice to undertake, through counsel of its own choosing
and at its own expense, the settlement or defense thereof, and the
Indemnified Party shall cooperate with it in connection therewith;
provided, however, that the Indemnified Party may participate in such
settlement or defense through counsel chosen by such Indemnified Party,
provided that the fees and expenses of such counsel shall be borne by such
Indemnified Party. The Indemnified Party shall not pay or settle any claim
which the indemnifying party is contesting. Notwithstanding the foregoing,
the Indemnified Party shall have the right to pay or settle any such claim,
provided that in such event it shall waive any right to indemnity therefor
by the indemnifying party. If the indemnifying party does not notify the
Indemnified Party within 20 days after the receipt of the Indemnified
Party's notice of a claim of indemnity hereunder that it elects to
undertake the defense thereof, the Indemnified Party shall have the right
to contest, settle or compromise the claim but shall not thereby waive any
right to indemnity therefor pursuant to this Agreement.
ARTICLE 9
Termination
Section 9.1 Termination. (a) This Agreement may be terminated at
any time prior to the Closing by:
(i) the mutual consent of the Company and Buyer;
(ii) Buyer (if it is not in breach of any of its material
obligations hereunder) in the event of a breach or failure by the
Company that is material in the context of the transactions
contemplated hereby of any representation, warranty, covenant or
agreement by the Company contained herein; or
(iii) the Company (if it is not in breach of any of its
material obligations hereunder) in the event of a breach or
failure by Buyer that is material in the context of the
transactions contemplated hereby of any representation, warranty,
covenant or agreement by Buyer contained herein which has not
been, or cannot be, cured within 30 Business Days after written
notice of such breach is given to Buyer.
Section 9.2 Procedure and Effect of Termination. In the event of
termination of this Agreement by either or both of the Company and Buyer
pursuant to Section 9.1, written notice thereof shall forthwith be given by
the terminating party to the other party hereto, and this Agreement shall
thereupon terminate and become void and have no effect, and the
transactions contemplated hereby shall be abandoned without further action
by the parties hereto, except that the provisions of Sections 3.20 and 4.7
(Brokers or Finders), 5.4 (Public Announcements; Confidentiality), Article
8 (Survival; Indemnification), 9.3 (Expenses), 10.2 (Governing law), and
10.4 (Notices), and any related definitional, interpretive or other
provisions necessary for the logical interpretation of such provisions,
shall survive the termination of this Agreement; provided, however, that
such termination shall not relieve any party hereto of any liability for
any breach of this Agreement.
Section 9.3 Expenses. Except as set forth in this Agreement,
whether or not the Note Purchase is consummated and regardless of any
reason for which this Agreement may have been terminated pursuant to
Section 9.1, all costs and expenses incurred by Buyer in connection with
this Agreement and the transactions contemplated hereby, including without
limitation, reasonable fees, expenses and reimbursements of counsel to
Buyer, reasonable out-of-pocket expenses incurred by Buyer and Buyer's
agents and representatives incurred in performing due diligence and all
other reasonable out-of-pocket expenses incurred by Buyer in connection
with this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby (collectively, "Buyer's
Expenses") shall be paid by the Company.
ARTICLE 10
Miscellaneous
Section 10.1 Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have
been signed by each party hereto and delivered to the other party. Copies
of executed counterparts transmitted by telecopy, telefax or other
electronic transmission service shall be considered original executed
counterparts for purposes of this Section, provided receipt of copies of
such counterparts is confirmed.
Section 10.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA
WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF.
Section 10.3 Entire Agreement. This Agreement (including
agreements incorporated herein) and the Schedules and Exhibits hereto
contain the entire agreement between the parties with respect to the
subject matter hereof and there are no agreements, understandings,
representations or warranties between the parties other than those set
forth or referred to herein. This Agreement is not intended to confer upon
any person not a party hereto (and their successors and assigns) any rights
or remedies hereunder.
Section 10.4 Notices. All notices and other communications
hereunder shall be sufficiently given for all purposes hereunder if in
writing and delivered personally, sent by documented overnight delivery
service or, to the extent receipt is confirmed, telecopy, telefax or other
electronic transmission service to the appropriate address or number as set
forth below. Notices to the Company shall be addressed to:
ARV Assisted Living, Inc.
000 Xxxxxxx Xxxxxx, X-0
Xxxxx Xxxx, XX 00000
Attention: President and General Counsel
Telecopy Number: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Telecopy Number: (000) 000-0000
or at such other address and to the attention of such other person as the
Company may designate by written notice to Buyer. Notices to Buyer shall be
addressed to:
Lazard Freres Real Estate Investors L.L.C.
Thirty Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Xxxxx X. Xxxxx & Xxxxx Xxxxxxxxxxx
Telecopy Number: (000) 000-0000
with a copy to:
Cravath, Swaine & Xxxxx
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopy Number: (000) 000-0000
Section 10.5 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors. Buyer and the Advancing Party shall be permitted to
assign any of their rights hereunder to any Affiliate of Buyer or the
Advancing Party, provided that such Affiliate agrees to be bound hereby and
by the Stockholders Agreement, and provided that Buyer and the Advancing
Party shall remain liable hereunder, and provided that any bona fide
financial institution to which any Buyer, the Advancing Party or any
permitted transferee has Transferred (as that term is used in the
Stockholders Agreement) (including upon foreclosure of a pledge) shares of
Company Stock or Company Notes for the purpose of securing bona fide
indebtedness of any Buyer and which has agreed to be bound by this
Agreement and the Stockholders Agreement shall also be entitled to enforce
the rights of Buyer and the Advancing Party hereunder.
Section 10.6 Headings. The Section, Article and other headings
contained in this Agreement are inserted for convenience of reference only
and will not affect the meaning or interpretation of this Agreement. All
references to Sections or Articles contained herein mean Sections or
Articles of this Agreement unless otherwise stated.
Section 10.7 Amendments and Waivers. This Agreement may not be
modified or amended except by an instrument or instruments in writing
signed by the party against whom enforcement of any such modification or
amendment is sought. Either party hereto may, only by an instrument in
writing, waive compliance by the other party hereto with any term or
provision hereof on the part of such other party hereto to be performed or
complied with. The waiver by any party hereto of a breach of any term or
provision hereof shall not be construed as a waiver of any subsequent
breach.
Section 10.8 Interpretation; Absence of Presumption.
(a) For the purposes hereof, (i) words in the singular shall
be held to include the plural and vice versa and words of one gender shall
be held to include the other gender as the context requires, (ii) the terms
"hereof", "herein", and "herewith" and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement as a whole
(including all of the Schedules and Exhibits hereto) and not to any
particular provision of this Agreement, and Article, Section, paragraph,
Exhibit and Schedule references are to the Articles, Sections, paragraphs,
Exhibits and Schedules to this Agreement unless otherwise
specified, (iii) the word "including" and words of similar import when used
in this Agreement shall mean "including, without limitation," unless the
context otherwise requires or unless otherwise specified, (iv) the word
"or" shall not be exclusive, and (v) provisions shall apply, when
appropriate, to successive events and transactions.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the
party drafting or causing any instrument to be drafted.
Section 10.9 Severability. Any provision hereof which is invalid
or unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions
hereof.
Section 10.10 Further Assurances. The Company and Buyer agree
that, from time to time, whether before, at or after any Closing Date, each
of them will execute and deliver such further instruments of conveyance and
transfer and take such other action as may be necessary to carry out the
purposes and intents hereof.
Section 10.11 Specific Performance. Buyer and the Company each
acknowledge that, in view of the uniqueness of the parties hereto, the
parties hereto would not have an adequate remedy at law for money damages
in the event that this Agreement were not performed in accordance with its
terms, and therefore agree that the parties hereto shall be entitled to
specific enforcement of the terms hereof in addition to any other remedy to
which the parties hereto may be entitled at law or in equity.
Section 10.12 Joint and Several Liability. The obligations and
liabilities of Buyer and the Advancing Party under or in connection with
this Agreement are joint and several.
Section 10.13 Interpretation of Schedules. Any matter set forth
on any Schedule shall be deemed to be referred to on all other Schedules to
which such matter logically relates and where such reference would be
appropriate and can reasonably be inferred from the matters disclosed on
the first Schedule as if set forth on such other Schedules.
Section 10.14 Acknowledgment of Company's Right to Take Certain
Actions. Notwithstanding anything to the contrary herein, the Company may,
at its sole discretion, reincorporate the Company under the laws of the
State of Delaware.
IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties hereto as of the day first above written.
ARV ASSISTED LIVING, INC.
by: /s/ Xxxxxx X. Xxxxxxx
------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President
PROMETHEUS ASSISTED LIVING LLC
by: Lazard Freres Real Estate Investors
L.L.C., its sole member
by: /s/ Xxxxxx X. Xxxxxxx
-------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President
LAZARD FRERES REAL ESTATE INVESTORS
L.L.C.
by: /s/ Xxxxxx X. Xxxxxxx
---------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President
